Xerox 2012 Annual Report Download - page 47

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45Xerox 2012 Annual Report
• $351 million increase from higher share repurchases in 2012.
• $157 million increase from net debt activity. 2012 reflects net
proceeds of $1.1 billion from Senior Notes issued in March offset by
net payments on 2012 Senior Notes of $1.1 billion that matured
in May and a decrease of $100 million in Commercial Paper. 2011
includes proceeds of $1.0 billion from the issuance of Senior Notes
offset by the repayment of $750 million for Senior Notes due in
2011 and a decrease of $200 million in Commercial Paper.
• $47 million increase due to higher distributions to noncontrolling
interests.
Net cash used in financing activities was $1,586 million for the year
ended December 31, 2011. The $1,530 million decrease in the use of
cash from 2010 was primarily due to the following:
• $3,105 million decrease from net debt activity. 2011 includes
proceeds of $1.0 billion from the issuance of Senior Notes offset by
the repayment of $750 million for Senior Notes due in 2011 and a
decrease of $200 million in Commercial Paper. 2010 includes the
repayments of $1,733 million of ACS’s debt on the acquisition date,
$950 million of Senior Notes, $550 million early redemption of the
2013 Senior Notes, net payments of $109 million for other debt
and $14 million of debt issuance costs for the bridge loan facility
commitment, which was terminated in 2009. These payments were
offset by an increase of $300 million in Commercial Paper.
• $701 million increase resulting from the resumption of our share
repurchase program.
• $670 million increase reflecting the payment of our liability to Xerox
Capital Trust I in connection with their redemption of preferred
securities.
• $139 million increase due to lower proceeds from the issuances of
common stock under our stock option plans.
• $26 million increase reflecting a full year of dividend payments on
shares issued in connection with the acquisition of ACS in 2010.
• $12 million increase due to higher share repurchases related to
employee withholding taxes on stock-based compensation vesting.
Customer Financing Activities
We provide lease equipment financing to our customers, primarily
in our Document Technology segment. Our lease contracts permit
customers to pay for equipment over time rather than at the date
of installation. Our investment in these contracts is reflected in Total
finance assets, net. We primarily fund our customer financing activity
through cash generated from operations, cash on hand, commercial
paper borrowings, sales and securitizations of finance receivables and
proceeds from capital markets offerings.
We have arrangements in certain international countries and
domestically with our small and mid-sized customers, where third-
party financial institutions independently provide lease financing,
on a non-recourse basis to Xerox, directly to 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
unrelated third-party finance receivable and debt are not included in
our Consolidated Financial Statements.
The following represents our Total finance assets, net associated with
our lease and finance operations: December 31,
(in millions) 2012 2011
Total Finance receivables, net (1) $ 5,313 $ 6,362
Equipment on operating leases, net 535 533
Total Finance Assets, Net $ 5,848 $ 6,895
(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 our Consolidated Balance
Sheets.
The decrease of $1,047 million in Total finance assets, net reflects
the sale of finance receivables (discussed further below) and the
decrease in equipment sales over the past several years, as well as
equipment sales growth in regions or operations where we don’t
offer direct leasing. These impacts were partially offset by an
increase of $83 million due to currency.
We maintain a certain level of debt, referred to as financing debt,
to support our investment in these lease contracts or Total finance
assets, net. We maintain this financing debt at an assumed 7:1
leverage ratio of debt to equity as compared to our Total finance
assets, net for this financing aspect of our business. Based on this
leverage, the following represents the breakdown of our total debt
at December 31, 2012 and 2011 between financing debt and core
debt: December 31,
(in millions) 2012 2011
Financing debt (1) $ 5,117 $ 6,033
Core debt 3,372 2,600
Total Debt $ 8,489 $ 8,633
(1) Financing debt includes $4,649 million and $5,567 million as of December 31, 2012
and December 31, 2011, respectively, of debt associated with Total finance receivables,
net and is the basis for our calculation of “Equipment financing interest” expense. The
remainder of the financing debt is associated with Equipment on operating leases.