Xerox 2011 Annual Report Download - page 49

Management’s Discussion
47Xerox 2011 Annual Report
In May 2011, Xerox Capital Trust I (“Trust I”), our wholly owned
subsidiary, redeemed its 8% Preferred Securities due in 2027 of
$650 million. The redemption resulted in a pre-tax loss on
extinguishment of debt of $33 million ($20 million after-tax),
representing the call premium of approximately $10 million and
the write-off of unamortized debt costs and other liability carrying
value adjustments of approximately $23 million.
Refer to Note 11 – Debt in the Consolidated Financial Statements for
additional information regarding 2011 debt activity.
In February 2012, we completed an exchange of our 5.71% Zero Coupon
Notes due 2023 with an accreted book value at the date of the exchange
of $303 million, for approximately $363 million of our 4.50% Senior Notes
due 2021. Accordingly, this increased the principal amount for our 4.5%
Senior notes due 2021 from $700 million to $1,063 million. The exchange
was conducted to retire high-interest long-dated debt in a favorable
interest rate environment.
Refer to Note 21 – Subsequent Events in the Consolidated Financial
Statements for additional information regarding this debt exchange.
FinancialInstruments
Refer to Note 12 – Financial Instruments in the Consolidated Financial
Statements for additional information regarding our derivative financial
instruments.
ShareRepurchasePrograms–TreasuryStock
In July 2011, we resumed our share repurchase program previously
authorized by our Board of Directors. During 2011, we repurchased
87.9 million shares for an aggregate cost of $701 million, including
fees. Through February 21, 2012, we repurchased an additional 6.1
million shares at an aggregate cost of $50 million, including fees,
for a cumulative program total of 288.1 million shares at a cost of
$3.7 billion, including fees. In January 2012, the Board of Directors
authorized an additional $500 million in share repurchase, bringing
the total remaining authorization for share repurchases to $1.3 billion
as of February 21, 2012.
Refer to Note 18 – Shareholders’ Equity – Treasury Stock in the
Consolidated Financial Statements for additional information regarding
our share repurchase programs.
Dividends
The Board of Directors declared aggregate dividends of $241 million
and $243 million on common stock in 2011 and 2010, respectively.
The decrease in 2011 is primarily due to a lower level of outstanding
shares in 2011 as a result of the repurchase of shares under our share
repurchase programs.
The Board of Directors declared aggregate dividends of $24 million
and $21 million on the Series A Convertible Preferred Stock in 2011
and 2010, respectively. The preferred shares were issued 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 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.
Our principal debt maturities are in line with historical and projected cash
flows and are spread over the next 10 years as follows (in millions):
Year Amount
2012 $ 1,545
2013 425
2014 1,078
2015 1,252
2016 951
2017 501
2018 1,001
2019 650
2020 —
2021 and thereafter 1,047
Total $ 8,450
2012 maturities include $100 million of Commercial Paper and $301
million for the 5.71% Zero Coupon Notes due 2023. In February 2012, we
completed an exchange of the 5.71% Zero Coupon Notes due 2023 for
approximately $363 million of our 4.50% Senior Notes due 2021.
ForeignCash
At December 31, 2011, we had $902 million of cash and cash equivalents
on a consolidated basis. Of that amount, approximately $280 million was
held outside the U.S. by our foreign subsidiaries and is needed to fund
future working capital, investment and financing needs of our foreign
subsidiaries. Accordingly, we have asserted that such funds are indefinitely
reinvested outside the U.S.
We believe we have sufficient levels of cash and cash flows to support
our domestic requirements. However, if the cash held by our foreign
subsidiaries were needed to fund our U.S. requirements, there would not
be a significant tax liability associated with the repatriation, as any U.S.
liability would be reduced by the foreign tax credits associated with the
repatriated earnings.