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You’ll find us everywhere business gets done.
2011 Annual Report

Table of contents

  • Page 1
    You'll find us everywhere business gets done. 2011 Annual Report

  • Page 2
    ...million customer care interactions daily through call centers, help desks and online support Document Management 30% savings in document costs through Xerox's managed print services; four-year leader in Gartner MPS Magic Quadrant Human Resources Services 4.4 million employees and retirees served...

  • Page 3
    ... Business Management's Discussion and Analysis Consolidated Financial Statements Notes to Consolidated Financial Statements 105 107 108 109 110 111 Reports and Signatures Quarterly Results of Operations Five Years in Review Performance Graph Corporate Information Officers Xerox 2011 Annual Report...

  • Page 4
    Financial Highlights (in millions, except EPS) 2011 $ 22,626 3,856 18,770 1,295 1,563 0.90 1.08 1,961 9.8% 2010 $ 21,633 3,857 17,776 606 1,296 0.43 0.94 2,726 9.6% Total revenue Equipment sales Annuity revenue Net income - Xerox Adjusted net income* - Xerox Diluted earnings per share Adjusted ...

  • Page 5
    .... More of our total revenue now comes from services than technology. In 2011, revenue from services grew six percent pro-forma1. And, through expanded sales activities, we won a considerable amount of new business - increasing our new business signings by 14 percent. Xerox 2011 Annual Report 3

  • Page 6
    ... our number-one equipment revenue market share position, but we also grew share in 2011. We did this by offering a more extensive and affordable portfolio of color products and by expanding our distribution to serve more small and midsize businesses around the world. Third: Managing our business...

  • Page 7
    ... the customer doesn't care too much about or need to know about. By the way, much the same is true of the ACS tradition - a company that was built over time on the premise that being exceptionally good at back-office work gave its clients one less thing to worry about. Xerox 2011 Annual Report 5

  • Page 8
    ... and other airlines asked us to convert their paper tickets to an electronic format, streamlining the process and delivering a 75 percent reduction in turnaround time." A second concern that customers keep bringing up is one everyone can relate to - information overload. We all deal with mountains...

  • Page 9
    ...ve global research labs into our products and services, we continue to differentiate ourselves with clients and competitors. The Xerox group, which includes our partnership with Fuji Xerox, garnered 1,618 U.S. patents last year, placing us eighth on the IFI patent intelligence list worldwide - and...

  • Page 10
    ..., manage and evaluate our business and make operating decisions. These non-GAAP measures are among the primary factors management uses in planning for and forecasting future periods. A reconciliation of these non-GAAP financial measures to the most directly comparable financial measures calculated...

  • Page 11
    ... reported EPS Weighted average shares for adjusted EPS Revenue Growth - Pro-forma/Without Currency (in millions) Revenue Category Equipment sales Supplies, paper and other Sales Service, outsourcing and rentals Finance income Total Revenues Segment Services Technology Other Total Revenues (1) 2011...

  • Page 12
    ... Cincinnati, OH A: Member of the Audit Committee B: Member of the Compensation Committee C: Member of the Corporate Governance Committee D: Member of the Finance Committee * Retiring from the Xerox Board; all other directors are up for re-election at the 2012 Annual Meeting of Shareholders. 10

  • Page 13
    ... year of transformation for our business, and a year when - all said and done - Xerox people delivered solid financial results, made measured progress, and continued to build our company into the world's leading enterprise for business process and document management. Xerox 2011 Annual Report 11

  • Page 14
    ... of business process and IT outsourcing support, document technology and solutions. Through our business process and IT outsourcing, we offer global services from claims reimbursement and electronic toll transactions to the management of HR benefits and customer care centers to the operation of...

  • Page 15
    ... is comprised of our document technology and related supplies, technical service and equipment financing (that which is not related to document outsourcing contracts). Our strategic product groups within this segment include Entry, Mid-range and Highend products. Xerox 2011 Annual Report 13

  • Page 16
    ...and their overall print-related costs. • In July 2011, we acquired Education and Sales Marketing, LLC ("ESM"), a leading provider of outsourced enrollment management and student loan default solutions. The acquisition of ESM enables us to offer a broader range of financial services to assist post...

  • Page 17
    ... includes revenues from services, maintenance, supplies, rentals and financing. n 17% Equipment Sales The remaining 17% of our revenue comes from equipment sales, from either lease arrangements that qualify as sales for accounting purposes or outright cash sales. Xerox 2011 Annual Report 15

  • Page 18
    ... ability to solve complex business problems for customers of all of our businesses. 4 Xerox Research Centre Europe XRCE research differentiates Xerox business process service offerings. The center focuses on image, text and data analytics, business process modeling and the study and understanding...

  • Page 19
    ...products and supplies, as well as the associated technical service and financing of those products. n $1,530 Other Fuji Xerox invested $880 million in R&D in 2011, $821 million in 2010 and $796 million in 2009. '09 '10 '11 The Other segment primarily includes revenue from paper sales, wide-format...

  • Page 20
    ... services for retail, travel and non-healthcare insurance companies. We handle their data entry, mailroom, imaging input and hosting, call centers and help desk with targeted industry focus. Government Solutions: We support our government clients with • solutions for child support payment...

  • Page 21
    ... and Intel systems, which: • Meets the conflicting demands of various operating models • Delivers secure cloud services via five global data centers • Is quickly installed and ready to use • Ensures complete tracking, auditing and reporting capabilities. Xerox 2011 Annual Report 19

  • Page 22
    ... and business processes to grow revenue, reduce costs and operate more efficiently. Our two primary offerings within Document Outsourcing are Managed Print Services and Communication and Marketing Services. Managed Print Services Xerox MPS optimizes, rationalizes and manages the operations of Xerox...

  • Page 23
    ... dynamic Web content, prompt a phone call from a sales or customer service representative, or be immediately available for the next wave of a print campaign. Technology Revenue Mix 21% 22% 57% n 57% Mid-range The Mid-range business comprises a wide range of multifunction printers, copiers...

  • Page 24
    ... direct sales force. We offer a wide range of multifunction printers, copiers, digital printing presses and light production devices that deliver ï¬,exibility and advanced features. In 2011, our Mid-range business continued to build on our position in the market by: • Making high-quality color...

  • Page 25
    ...-enabled device. The Xerox Mobile Print Solution removes the last barrier to mobile productivity, enabling printing from any email-enabled device. The solution is: Our High-end digital color and monochrome solutions are designed for customers in the graphic communications industry and for large...

  • Page 26
    ... to Xerox, results in vivid image quality on low-cost papers. Through our industry-leading FreeFlow Digital Workï¬,ow collection and FreeFlow Print Server, we deliver three primary values to our customers - the ability to Connect, Control and Enable. Our solutions: • Connect our customers to...

  • Page 27
    ... our trademarks. Our go-to-market approach includes the largest direct sales force in the industry, with customers served by Client Managing Directors, Account General Managers and Sales Representatives. For small and midsize businesses, we continued to expand our distribution in 2011 by acquiring...

  • Page 28
    ...,500 technical service employees and approximately 100,000 employees serving our customers through on-site operations or off-site delivery centers. Customer Financing We finance a large portion of our direct channel customer purchases of Xerox equipment through bundled lease agreements. Financing...

  • Page 29
    ... of Customer Care Centers, Mega IT Data Centers, Finance and Accounting Centers, Human Resource Centers and Document Process Centers. Our global production model is enabled by the use of proprietary technology, which allows us to securely distribute client transactions within data privacy limits...

  • Page 30
    ... related to document outsourcing contracts). Our product categories within this segment include Entry, Mid-range and High-end products. Maintaining our leadership in document technology was a key priority in 2011. We not only continued to hold our number-one equipment revenue market share position...

  • Page 31
    ...assets (finance receivables and equipment on operating leases); achieving an optimal cost of capital; and effectively deploying cash to maximize shareholder value through share repurchases, acquisitions and dividends. Financial Overview Total revenue of $22.6 billion in 2011 grew 5% from the prior...

  • Page 32
    ...Significant Accounting Policies in the Consolidated Financial Statements. Revenue Recognition for Bundled Lease Arrangements We sell our products and services under bundled lease arrangements, which typically include equipment, service, supplies and financing components for which the customer pays...

  • Page 33
    ... future events are used in calculating the expense, liability and asset values related to our pension and retiree health benefit plans. These factors include assumptions we make about the discount rate, expected return on plan assets, rate of increase in healthcare costs, the rate of future...

  • Page 34
    ... 2010 2009 Benefit plan costs are included in several income statement components based on the related underlying employee costs. Pension and retiree health benefit plan assumptions are included in Note 14 - Employee Benefit Plans in the Consolidated Financial Statements. Income Taxes We record...

  • Page 35
    ...our DO, BPO and ITO service offerings to commercial and government customers, both domestically and internationally. • Technology - In 2011, we continued to hold our number-one equipment revenue market share position and we also grew market share. We also launched 27 new products, reï¬,ecting the...

  • Page 36
    ... 2011 2010 Percent of Total Revenue 2011 2010 2009 Equipment sales Annuity revenue Total Revenue Memo: Color(2) Reconciliation to Consolidated Statements of Income: Sales Less: Supplies, paper and other sales Equipment Sales Service, outsourcing and rentals Add: Finance income Add: Supplies, paper...

  • Page 37
    ... the change in revenue for each business segment is included in the "Operations Review of Segment Revenue and Profit" section. Costs, Expenses and Other Income Summary of Key Financial Ratios Year Ended December 31, 2011 2010 2009 2011 Change 2010 2011 Pro-forma(1) 2010 Total Gross Margin RD&E as...

  • Page 38
    ... $59 million lower, reï¬,ecting the impact of restructuring cost actions which consolidated the development and engineering infrastructures within our Technology segment. Selling, Administrative and General Expenses ("SAG") SAG as a percentage of revenue of 19.9% decreased 1.3-percentage points, or...

  • Page 39
    ... Back-office administration - Development and engineering. • $28 million for lease termination costs primarily reï¬,ecting the continued rationalization and optimization of our worldwide operating locations, including consolidations with ACS. • $19 million loss associated with the sale of our...

  • Page 40
    ...-off of the ACS trade name as a result of the decision to discontinue its use and transition the services business to the "Xerox Services" trade name. The remainder of the increase primarily reï¬,ects the additional month of amortization of intangibles associated with our acquisition of ACS in 2010...

  • Page 41
    ... million relates to the settlement of claims by ACS shareholders arising from our acquisition of ACS in 2010. The total settlement for all defendants was approximately $69 million, with Xerox paying approximately $36 million net of insurance proceeds. Litigation Matters: Litigation matters for 2011...

  • Page 42
    ... by Fuji Xerox), acquisition-related costs and other discrete costs and expenses. Refer to the "Non-GAAP Financial Measures" section for the reconciliation of reported net income to adjusted net income. Recent Accounting Pronouncements Refer to Note 1 - Summary of Significant Accounting Policies in...

  • Page 43
    ...a significant pipeline since the ACS acquisition. This sales pipeline includes the Total Contract Value ("TCV") of new business opportunities that potentially could be contracted within the next six months and excludes business opportunities with estimated annual recurring revenue in excess of $100...

  • Page 44
    ... net income from unconsolidated affiliates, more than offset the gross margin decline. Installs 2011 Entry 4% decrease in entry black-and-white and color multifunction devices and color printers reï¬,ecting: • A decline in sales to OEM partners • A decline in developing markets due in part to...

  • Page 45
    ... Color 800 and 1000. Install activity percentages include installations for Document Outsourcing and the Xerox-branded product shipments to GIS. Descriptions of "Entry," "Mid-range" and "High-end" are defined in Note 2 - Segment Reporting in the Consolidated Financial Statements. Other Revenue 2011...

  • Page 46
    ... accounts payable and accrued compensation, primarily related to higher inventory purchases and the timing of accounts payable payments, as well as increased compensation, benefit and other accruals. • $141 million increase primarily from the early termination of certain interest rate swaps...

  • Page 47
    ... of the equipment to these financial institutions. Generally, we have no continuing ownership rights in the equipment subsequent to its sale; therefore, the unrelated third-party finance receivable and debt are not included in our Consolidated Financial Statements. Xerox 2011 Annual Report 45

  • Page 48
    ... is associated with Equipment on operating leases. Refer to Note 4 - Receivables, Net in the Consolidated Financial Statements for additional information. Credit Facility and Capital Market Activity In 2011, we refinanced our $2.0 billion unsecured revolving Credit Facility that was executed in...

  • Page 49
    ... in connection with the acquisition of ACS. The slight increase in dividends is due to the shares being outstanding for a full year in 2011 as compared to 11 months in 2010. Liquidity and Financial Flexibility We manage our worldwide liquidity using internal cash management practices, which are...

  • Page 50
    ...2014 2015 2016 Thereafter Total debt, including capital lease obligations Minimum operating lease commitments(2) Defined benefit pension plans Retiree health payments Estimated Purchase Commitments: Flextronics(3) Fuji Xerox(4) IM service contracts(5) Other(6) Total (1) $ 1,541 637 560 80 599...

  • Page 51
    ... the year. The amounts reported in the above table as retiree health payments represent our estimate of future benefit payments. Fuji Xerox We purchased products, including parts and supplies, from Fuji Xerox totaling $2.2 billion, $2.1 billion and $1.6 billion in 2011, 2010 and 2009, respectively...

  • Page 52
    ... Xerox Limited, Fuji Xerox, Xerox Canada Inc. and Xerox Brasil, and translated into U.S. Dollars using the year-end exchange rates, was approximately $7.4 billion at December 31, 2011. Interest Rate Risk Management The consolidated weighted-average interest rates related to our total debt for 2011...

  • Page 53
    ..., 2011(1) (in millions; except per share amounts) Net Income EPS Net Income 2010 EPS As Reported Adjustments: Amortization of intangible assets Loss on early extinguishment of liability Xerox and Fuji Xerox restructuring charges ACS acquisition-related costs ACS shareholders' litigation settlement...

  • Page 54
    ... on early extinguishment of liability. Operating Income/Margin Reconciliation: As Reported (in millions) 2011 2010 2009 2010 Pro-forma 2009 Total Revenue Pre-tax Income Adjustments: Amortization of intangible assets Xerox restructuring charge Curtailment gain ACS acquisition-related costs Other...

  • Page 55
    Management's Discussion Pro-forma: Year Ended December 31, As Reported (in millions) 2011 2010 2009 Pro-forma(1) 2010 2009 As Reported Change 2011 2010 Pro-forma Change 2011 2010(2) Total Xerox Revenue: Equipment sales Supplies, paper and other Sales Service, outsourcing and rentals Finance income...

  • Page 56
    ... identify forward-looking statements. These statements reï¬,ect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. Information concerning these factors is included in our 2011 Annual Report on Form 10...

  • Page 57
    ... per-share data) 2011 2010 2009 Revenues Sales Service, outsourcing and rentals Finance income Total Revenues Costs and Expenses Cost of sales Cost of service, outsourcing and rentals Equipment financing interest Research, development and engineering expenses Selling, administrative and general...

  • Page 58
    ... to Xerox (1) Refer to Note 19 - Comprehensive Income for gross components of other comprehensive income, reclassification adjustments out of accumulated other comprehensive income and related tax effects. The accompanying notes are an integral part of these Consolidated Financial Statements. 56

  • Page 59
    ..., except share data in thousands) 2011 2010 Assets Cash and cash equivalents Accounts receivable, net Billed portion of finance receivables, net Finance receivables, net Inventories Other current assets Total current assets Finance receivables due after one year, net Equipment on operating leases...

  • Page 60
    ... Payments for restructurings Contributions to defined benefit pension plans (Increase) decrease in accounts receivable and billed portion of finance receivables Collections of deferred proceeds from sales of receivables (Increase) decrease in inventories Increase in equipment on operating leases...

  • Page 61
    ... information. Refer to Note 14 - Employee Benefit Plans for additional information regarding pension plan contributions. Refer to Note 19 - Comprehensive Income for components. The accompanying notes are an integral part of these Consolidated Financial Statements. Xerox 2011 Annual Report 59

  • Page 62
    ... method; (v) allowance for doubtful accounts; (vi) inventory valuation; (vii) restructuring and related charges; (viii) asset impairments; (ix) depreciable lives of assets; (x) useful lives of intangible assets; (xi) amortization period for customer contract costs; (xii) pension and post-retirement...

  • Page 63
    ... beginning January 1, 2010. Certain accounts receivable sale arrangements were modified in order to qualify for sale accounting under this updated guidance. The adoption of this update did not have a material effect on our financial condition or results of operations. Xerox 2011 Annual Report 61

  • Page 64
    ... of Accounting Policies Revenue Recognition We generate revenue through services, the sale and rental of equipment, supplies and income associated with the financing of our equipment sales. Revenue is recognized when earned. More specifically, revenue related to services and sales of our products...

  • Page 65
    ... costs plus profit thereon. These elements are generally recognized over the term of the lease as service revenue. The remaining amounts are allocated to the equipment and financing elements which are subjected to the accounting estimates noted above under "Leases." Xerox 2011 Annual Report...

  • Page 66
    ...-lease deliverables as described above. • Outright sales of equipment with a related full-service maintenance agreement. • Contracts for multiple types of outsourcing services, as well as professional and value-added services. For instance, we may contract for an implementation or development...

  • Page 67
    ...are capitalized and maintenance and repairs are expensed. Refer to Note 5 - Inventories and Equipment on Operating Leases, Net and Note 6 - Land, Buildings and Equipment, Net for further discussion. Software - Internal Use and Product We capitalize direct costs associated with developing, purchasing...

  • Page 68
    ... future events are used in calculating the expense, liability and asset values related to our pension and retiree health benefit plans. These factors include assumptions we make about the discount rate, expected return on plan assets, rate of increase in healthcare costs, the rate of future...

  • Page 69
    ... and application development, data center operations or testing and quality assurance. The segment classified as Other includes several units, none of which meets the thresholds for separate segment reporting. This group primarily includes Xerox Supplies Business Group (predominantly paper sales...

  • Page 70
    ... institutions and its offerings range from cash management services to statement and check processing. In July 2011, we acquired Education Sales and Marketing, LLC ("ESM"), a leading provider of outsourced enrollment management and student loan default solutions, for approximately $43 net of cash...

  • Page 71
    .... By providing customer education, product sales and marketing and clinical trial solutions, we augment the IT and BPO services we deliver to the healthcare and pharmaceutical industries. In July 2010, we acquired ExcellerateHRO, LLP ("EHRO"), a global benefits administration and relocation...

  • Page 72
    ... Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) The transaction was accounted for using the acquisition method of accounting which requires, among other things, that most assets acquired and liabilities assumed are recognized at their fair values as...

  • Page 73
    ...quality indicators and the financial health of specific customer classes or groups. The allowance for doubtful finance receivables is inherently more difficult to estimate than the allowance for trade accounts receivable because the underlying lease portfolio has an average maturity, at any time...

  • Page 74
    .... The primary customer classes are Finance & Other Services, Government & Education; Graphic Arts; Industrial; Healthcare and Other. In Europe, customers are further grouped by class based on the country or region of the customer. The primary customer classes include the U.K./Ireland, France and the...

  • Page 75
    ... Financial Statements (in millions, except per-share data and where otherwise noted) Credit-quality indicators are updated at least annually, and the credit quality of any given customer can change during the life of the portfolio. Details about our finance receivables portfolio based on industry...

  • Page 76
    ... to the Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) December 31, 2010 Investment Grade Non-investment Grade Substandard Total Finance Receivables Finance and Other Services Government and Education Graphic Arts Industrial Healthcare Other Total...

  • Page 77
    ...31-90 Days Past Due >90 Days Past Due Finance and Other Services Government and Education Graphic Arts Industrial Healthcare Other Total United States Canada France U.K./Ireland Central(1) Southern(2) Nordics(3) Total Europe Other Total $ 18 21 16 7 5 8 75 3 1 3 7 31 1 43 2 $123 $ 4 5 2 2 2 1 16...

  • Page 78
    ... and include desktop services, voice and data network-related services, mainframe application, development and support and mid-range applications processing and support. Payments for our outsourced information management services, which are primarily recorded in selling, administrative and general...

  • Page 79
    ... trademark, as well as rights to access our patent portfolio in exchange for access to their patent portfolio. These payments are included in Service, outsourcing and rental revenues in the Consolidated Statements of Income. We also have arrangements with Fuji Xerox whereby we purchase inventory...

  • Page 80
    ... for the accelerated write-off of the ACS trade name as a result of the fourth quarter 2011 decision to discontinue its use and transition our services business to the "Xerox Services" trade name. Excluding the impact of additional acquisitions, amortization expense is expected to approximate $329...

  • Page 81
    ... associated with the restructuring of our corporate aviation operations. The above charges were partially offset by $71 of net reversals for changes in estimated reserves from prior-period initiatives. Xerox 2011 Annual Report 79 The following table summarizes the total amount of costs incurred...

  • Page 82
    ...-office administration - Development and engineering costs. • $28 for lease termination costs, primarily reï¬,ecting the continued rationalization and optimization of our worldwide operating locations, particularly as a result of our acquisition of ACS. • $19 loss associated with the sale of...

  • Page 83
    Notes to the Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) The weighted-average interest rate for commercial paper at December 31, 2011, including issuance costs, was 0.71 percent and had maturities ranging from three to 48 days. We classify our ...

  • Page 84
    ... average effective interest rate of 4.595%. Proceeds from the offering were used to redeem the $650 Trust I 8% Preferred Securities mentioned below and for general corporate purposes. In conjunction with the issuance of these Senior Notes, debt issuance costs of $7 were deferred. Xerox Capital...

  • Page 85
    ...into limited types of derivative contracts, including interest rate swap agreements, foreign currency spot, forward and swap contracts and net purchased foreign currency options to manage interest rate and foreign currency exposures. Our primary foreign currency market exposures include the Japanese...

  • Page 86
    ... Financial Statements (in millions, except per-share data and where otherwise noted) Summary of Derivative Instruments Fair Value: The following table provides a summary of the fair value amounts of our derivative instruments: December 31, Designation of Derivatives Balance Sheet Location 2011...

  • Page 87
    ... for publicly traded securities or on the current rates offered to us for debt of similar maturities. The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at such date. Xerox 2011 Annual Report 85

  • Page 88
    ...post-retirement benefit plans. Pension Benefits 2011 2010 2011 Retiree Health 2010 Change in Benefit Obligation: Benefit obligation, January 1 Service cost Interest cost Plan participants' contributions Plan amendments(3) Actuarial loss Acquisitions(2) Currency exchange rate changes Curtailments...

  • Page 89
    ... December 31, Pension Benefits 2011 2010 2009 2011 Retiree Health 2010 2009 Components of Net Periodic Benefit Costs: Service cost Interest cost(1) Expected return on plan assets(2) Recognized net actuarial loss Amortization of prior service credit Recognized settlement loss Recognized curtailment...

  • Page 90
    ...actual return on plan assets" caption. To the extent that investment results relate to TRA, such results are charged directly to these accounts as a component of interest cost. Plan Amendments In December 2011, we amended all of our primary U.S. Defined Benefit Pension Plans for salaried employees...

  • Page 91
    ... Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) The following table presents the defined benefit plans assets measured at fair value at December 31, 2011 and the basis for that measurement: Valuation Based on: Quoted Prices in Active Markets for...

  • Page 92
    ... Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) The following table presents the defined benefit plans assets measured at fair value at December 31, 2010 and the basis for that measurement: Valuation Based on: Quoted Prices in Active Markets for...

  • Page 93
    ...benefit plans assets measured using significant unobservable inputs (Level 3 assets): Fair Value Measurement Using Significant Unobservable Inputs (Level 3) Private Equity/Venture Capital Guaranteed Insurance Contracts Real Estate Hedge Funds Other Total December 31, 2009 Purchases Sales Net...

  • Page 94
    ... levels do not impact earned benefits. Weighted-average assumptions used to determine net periodic benefit cost for years ended December 31: Pension Benefits 2012 2011 2010 2009 2012 Retiree Health 2011 2010 2009 Discount rate Expected return on plan assets Rate of compensation increase...

  • Page 95
    ...-tax income Common shareholders' equity: Changes in defined benefit plans Stock option and incentive plans, net Cash ï¬,ow hedges Translation adjustments Total Income Tax Expense (Benefit) $ 386 $ 256 $ 152 (277) 1 3 2 $ 115 12 (6) 5 6 $ 273 (61) 21 - (13) $ 99 Xerox 2011 Annual Report 93

  • Page 96
    ... from favorable settlements within income tax expense. We had $28, $31 and $13 accrued for the payment of interest and penalties associated with unrecognized tax benefits at December 31, 2011, 2010 and 2009, respectively. Deferred Tax Assets Research and development Post-retirement medical bene...

  • Page 97
    ...as well as disputes associated with former employees and contract labor. The tax matters, which comprise a significant portion of the total contingencies, principally relate to claims for taxes on the internal transfer of inventory, municipal service taxes on rentals and gross revenue taxes. We are...

  • Page 98
    Notes to the Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) Litigation Against the Company In re Xerox Corporation Securities Litigation: A consolidated securities law action (consisting of 17 cases) is pending in the United States District Court ...

  • Page 99
    ...-service maintenance agreement with the customer. The agreements generally extend over a period equivalent to the lease term or the expected useful life of the equipment under a cash sale. The service agreements involve the payment of fees in return for our performance of repairs and maintenance...

  • Page 100
    ...approximately $11.125 per share of common stock which is a 25% premium over $8.90, the average closing price of Xerox common stock over the seven-trading day period ended on September 14, 2009 and the number used for calculating the conversion price in the ACS merger agreement), subject to customary...

  • Page 101
    ... 50% of the value of the August 2009 options (maximum). At December 31, 2011, there was $124 of total unrecognized compensation cost related to nonvested RSUs, which is expected to be recognized ratably over a remaining weighted-average contractual term of 1.3 years. Xerox 2011 Annual Report 99

  • Page 102
    ... as part of the acquisition fair value. The remaining $54 is associated with ACS options issued in August 2009 which did not fully vest and become exercisable upon the acquisition, but continue to vest according to specified vesting schedules and, therefore, is being expensed as compensation cost...

  • Page 103
    ... to the Consolidated Financial Statements (in millions, except per-share data and where otherwise noted) The following table provides information relating to the status of, and changes in, outstanding stock options (stock options in thousands): 2011 Stock Options Weighted Average Option Price Stock...

  • Page 104
    ...ed to Cost of sales - refer to Note 12 - Financial Instruments for additional information regarding our cash ï¬,ow hedges. Reclassified to Total Net Periodic Benefit Cost - refer to Note 14 - Employee Benefit Plans for additional information. (3) Represents our share of Fuji Xerox's benefit plan...

  • Page 105
    ...December 31, 2011 2010 2009 Basic Earnings per Share: Net income attributable to Xerox Accrued dividends on preferred stock Adjusted Net Income Available to Common Shareholders Weighted-average common shares outstanding Basic Earnings per Share Diluted Earnings per Share: Net income attributable to...

  • Page 106
    ...IT services, copiers, printers and managed print services, for approximately $58. The acquisition furthers our coverage of Central Illinois and Eastern Iowa, building on our strategy to create a nationwide network of locally based companies focused on customers' needs to improve business performance...

  • Page 107
    ... on the above evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2011. Ursula M. Burns Chief Executive Officer Luca Maestri Chief Financial Officer Gary R. Kabureck Chief Accounting Officer Xerox 2011 Annual Report 105

  • Page 108
    ...nancial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management...

  • Page 109
    ...606 0.44 0.43 (1) The sum of quarterly earnings per share may differ from the full-year amounts due to rounding, or in the case of diluted earnings per share, because securities that are anti-dilutive in certain quarters may not be anti-dilutive on a full-year basis. Xerox 2011 Annual Report 107

  • Page 110
    ... Total Consolidated Capitalization Selected Data and Ratios Common shareholders of record at year-end Book value per common share Year-end common stock market price Employees at year-end Gross margin Sales gross margin Service, outsourcing and rentals gross margin Finance gross margin (1) $ 0.92...

  • Page 111
    ...Comparison of Cumulative Five-Year Total Return $150 n Xerox Corporation S&P 500 Index n S&P 500 Information Technology Index n $100 $50 $0 2006 2007 2008 2009 2010 2011 Total Return to Shareholders Year Ended December 31, (Includes reinvestment of dividends) 2006 2007 2008 2009 2010 2011...

  • Page 112
    ... and the Chicago Stock Exchange. Xerox Common Stock Prices and Dividends New York Stock Exchange composite prices* First Quarter Second Quarter Third Quarter Fourth Quarter 2011 High Low Dividends Paid per Share 2010 High Low Dividends Paid per Share * Prices as of close of business. $ 11.71 9.87...

  • Page 113
    ... Human Resources Officer David Amoriell Vice President Chief Operating Officer, Transportation, Central and Local Government Xerox Services Willem Appelo Vice President President, Global Delivery Group Xerox Technology Thomas Blodgett Vice President Chief Operating Officer, Europe Xerox Services...

  • Page 114
    ... mailed on April 10, 2012 to shareholders of record March 26, 2012. Investor Contacts Jennifer Horsley [email protected] Joseph Ketchum [email protected] This annual report is also available online at www.xerox.com/investor. Electronic Delivery Enrollment Xerox offers shareholders...

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