Xerox 2015 Annual Report Download - page 78

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Services Segment reconciliation:
Year Ended December 31, 2015
(in millions) Reported(1) HE Charge Adjusted
Annuity Revenue $ 9,644 $ 116 $ 9,760
BPO Revenue 6,872 116 6,988
Segment Revenue 10,137 116 10,253
% of Total Revenue 56% — 56%
Segment Profit 446 389 835
Segment Margin 4.4% 8.1%
__________________________
(1) Revenue from continuing operations.
Key Financial Ratios reconciliation:
Year Ended December 31, 2015
(in millions)
Gross
Margin
RD&E
as % of
Revenue
SAG
as % of
Revenue
Reported(1) 29.2% 3.1% 19.7%
Adjustment:
HE Charge 1.9 — (0.1)
Adjusted 31.1% 3.1% 19.6%
__________________________
(1) Revenue from continuing operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Financial Risk Management
We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect
operating results, financial position and cash flows. We manage our exposure to these market risks through our
regular operating and financing activities and, when appropriate, through the use of derivative financial instruments.
We utilized derivative financial instruments to hedge economic exposures, as well as reduce earnings and cash flow
volatility resulting from shifts in market rates.
Recent market events have not caused us to materially modify or change our financial risk management strategies
with respect to our exposures to interest rate and foreign currency risk. Refer to Note 14 - Financial Instruments in
the Consolidated Financial Statements for additional discussion on our financial risk management.
Foreign Exchange Risk Management
Assuming a 10% appreciation or depreciation in foreign currency exchange rates from the quoted foreign currency
exchange rates at December 31, 2015, the potential change in the fair value of foreign currency-denominated
assets and liabilities in each entity would not be significant because all material currency asset and liability
exposures were economically hedged as of December 31, 2015. A 10% appreciation or depreciation of the U.S.
Dollar against all currencies from the quoted foreign currency exchange rates at December 31, 2015 would have an
impact on our cumulative translation adjustment portion of equity of approximately $557 million. The net amount
invested in foreign subsidiaries and affiliates, primarily Xerox Limited, Fuji Xerox and Xerox Canada Inc. and
translated into U.S. Dollars using the year-end exchange rates, was approximately $5.6 billion at December 31,
2015.
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