Xerox 2013 Annual Report Download - page 31

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 finance receivables. At December 31, 2013, we had $4.5 billion of finance
receivables and $0.6 billion of equipment on operating leases, or Total Finance assets of $5.1 billion. We maintain
an assumed 7:1 leverage ratio of debt to equity as compared to our Finance assets, which results in the majority of
our $8.0 billion of debt being allocated to our financing business.
Refer to "Customer Financing Activities" in the Capital Resources and Liquidity section of Management's Discussion
and Analysis included in Item 7 of this 2013 Form 10-K, which is incorporated here by reference, for additional
information.
Manufacturing and Supply
Our manufacturing and distribution facilities are located around the world. The Company's largest manufacturing
site is in Webster, N.Y., where we produce Xerox® iGen and Nuvera® systems, components, EA Toner,
consumables, fusers, photoreceptors, and other products. 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 provides 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 (exclusive of extension
rights). 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, which is incorporated here by reference, for additional information regarding
our relationship with Fuji Xerox.
Services Global Production Model
Our global services production model is one of our key competitive advantages. We have approximately 130
Strategic Delivery Centers located around the world, including India, Philippines, Jamaica, Mexico, Guatemala,
Colombia, Brazil, Chile, Argentina, Ireland, Spain, Poland and Romania. These locations are comprised 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 across a global workforce. This global
production model allows us to make the most of lower-cost production locations, consistent methodology and
processes, and time zone advantages.
Fuji Xerox
Fuji Xerox is an unconsolidated entity in which we own a 25 percent interest, and FUJIFILM Holdings Corporation
(FujiFilm) owns a 75 percent interest. Fuji Xerox develops, manufactures and distributes document processing
products in Japan, China, Hong Kong, other areas of the Pacific Rim, Australia and New Zealand. We retain
significant rights as a minority shareholder. Our technology licensing agreements with Fuji Xerox ensure that the
two companies retain uninterrupted access to each other's portfolio of patents, technology and products.
Xerox 2013 Annual Report 14