Xerox 2012 Annual Report Download - page 27

25Xerox 2012 Annual Report
U.S. Department of State and are subject to U.S. economic sanctions.
We maintain an export and sanctions compliance program and
believe that we have been and are in compliance with U.S. laws
and government regulations for these countries. We have no assets,
liabilities or operations in these countries other than liabilities under the
distribution agreements. After observing required prior notice periods,
Xerox Limited terminated its distribution agreements with distributors
servicing Sudan and Syria in August 2006. Now, Xerox has only legacy
obligations to third parties, such as providing spare parts and supplies
to these third parties. In 2012, total Xerox revenues of $22.4 billion
included less than $35 thousand attributable to Sudan and Syria.
Competition
Although we encounter competition in all areas of our business, we
are the leader, or among the leaders, in each of our principal business
segments. We compete on the basis of technology, performance, price,
quality, reliability, brand, distribution and customer service and support.
In the Services business, our larger competitors include Accenture, Aon,
Computer Sciences Corporation, Convergys, Dell, Genpact, Hewlett-
Packard, IBM and Teletech. In addition, we compete with in-house
departments performing the functions that we are seeking to have
them outsource to us.
In the Document Technology business, our larger competitors include
Canon, Hewlett-Packard, Kodak, Konica Minolta, Lexmark and Ricoh.
Our brand recognition, positive reputation for business process and
document management, innovative technology and service delivery
are our competitive advantages. This combined with our breadth
of product offerings, global distribution channels and customer
relationships positions us as a strong competitor going forward.
Global Employment
Globally, we have approximately 147,600 direct employees,
including approximately 7,100 sales professionals, approximately
11,300 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
facilitates customer acquisition of Xerox technology and enhances
our value proposition, while providing Xerox an attractive gross
margin and a reasonable return on our investment in this business.
Additionally, because we primarily finance our own products and have
a long history of providing financing to our customers, we are able to
minimize much of the risk normally associated with a finance business.
Because our lease contracts permit 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 lease contracts. We fund our
customer financing activity through a combination of cash generated
from operations, cash on hand, proceeds from capital market offerings
and the sale of selected U.S. finance receivables. At December 31, 2012,
we had $5.3 billion of finance receivables and $0.5 billion of equipment
on operating leases, or total finance assets of $5.8 billion. We maintain
an assumed 7:1 leverage ratio of debt to equity as compared to our
finance assets, which results in a significant portion of our $8.5 billion
of debt being associated with our financing business.
Manufacturing and Supply
Our manufacturing and distribution facilities are located around
the world. The company’s largest manufacturing site is in Webster,
NY, where we produce fusers, photoreceptors, Xerox iGen and Xerox
Nuvera systems, components, consumables and other products. We
also have an EA Toner plant located in Webster. Our other primary
manufacturing operations are located in: Dundalk, Ireland, for our
high-end production products and consumables; and Wilsonville,
OR, for solid ink products, consumable supplies and components for
our mid-range and entry products. We also have a facility in Venray,
Netherlands, which handles supplies manufacturing and supply chain
management for the Eastern Hemisphere.
Our master supply agreement with Flextronics, a global electronics
manufacturing services company, to outsource portions of
manufacturing for our mid-range and entry businesses, continues
through 2014. We also acquire products from various third parties
in order to increase the breadth of our product portfolio and meet
channel requirements.
We have arrangements with Fuji Xerox under which we purchase and
sell products, some of which are the result of mutual research and
development agreements. Refer to Note 8 – Investments in Affiliates,
at Equity in the Consolidated Financial Statements in our 2012
Annual Report for additional information regarding our relationship
with Fuji Xerox.