Xerox 10-Q 22 Oct 09 2009 Q3 Quarterly report Financial data

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (USD $)
In Millions, except Per Share data	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Revenues
Sales	$1,555	$2,047	$4,651	$6,179
Service, outsourcing and rentals	1,942	2,126	5,773	6,446
Finance income	178	197	536	613
Total Revenues	3,675	4,370	10,960	13,238
Costs and Expenses
Cost of sales	1,031	1,340	3,100	4,059
Costs of service, outsourcing and rentals	1,113	1,241	3,313	3,747
Equipment financing interest	67	75	204	234
Research, development and engineering expenses	209	228	615	672
Selling, administrative and general expenses	1,007	1,138	3,024	3,432
Restructuring and asset impairment charges	(2)	14	(5)	80
Other expenses, net	92	87	276	1,022
Total Costs and Expenses	3,517	4,123	10,527	13,246
Income (Loss) before Income Taxes and Equity Income	158	247	433	(8)
Income tax expense (benefit)	44	15	122	(172)
Equity in net income of unconsolidated affiliates	15	35	14	92
Net Income	129	267	325	256
Less: Net income attributable to noncontrolling interests	6	9	20	27
Net Income Attributable to Xerox	$123	$258	$305	$229
Basic Earnings per Share	0.14	0.3	0.35	0.26
Diluted Earnings per Share	0.14	0.29	0.35	0.25

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $)
In Millions, except Share data	Sep. 30, 2009	Dec. 31, 2008
Assets
Cash and cash equivalents	$1,159	$1,229
Accounts receivable, net	1,863	2,184
Billed portion of finance receivables, net	256	254
Finance receivables, net	2,386	2,461
Inventories	1,069	1,232
Other current assets	707	790
Total current assets	7,440	8,150
Finance receivables due after one year, net	4,381	4,563
Equipment on operating leases, net	550	594
Land, buildings and equipment, net	1,351	1,419
Investments in affiliates, at equity	1,051	1,080
Intangible assets, net	609	610
Goodwill	3,405	3,182
Deferred tax assets, long-term	1,673	1,692
Other long-term assets	1,293	1,157
Total Assets	21,753	22,447
Liabilities and Equity
Short-term debt and current portion of long-term debt	1,149	1,610
Accounts payable	1,292	1,446
Accrued compensation and benefits costs	616	625
Other current liabilities	1,373	1,769
Total current liabilities	4,430	5,450
Long-term debt	6,297	6,774
Liability to subsidiary trust issuing preferred securities	649	648
Pension and other benefit liabilities	1,870	1,747
Post-retirement medical benefits	873	896
Other long-term liabilities	603	574
Total Liabilities	14,722	16,089
Common stock	870	866
Additional paid-in-capital	2,463	2,447
Retained earnings	5,532	5,341
Accumulated other comprehensive loss	(1,967)	(2,416)
Xerox Shareholders' Equity	6,898	6,238
Noncontrolling Interests	133	120
Total Equity	7,031	6,358
Total Liabilities and Equity	$21,753	$22,447
Shares of common stock issued	869,245	864,777
Shares of common stock outstanding	869,245	864,777

1_CONDENSED CONSOLIDATED STATEM

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $)
In Millions	3 Months Ended Sep. 30, 2009	3 Months Ended Sep. 30, 2008	9 Months Ended Sep. 30, 2009	9 Months Ended Sep. 30, 2008
Cash Flows from Operating Activities:
Net Income	$129	$267	$325	$256
Adjustments required to reconcile net income (loss) to cash flows from operating activities:
Depreciation and amortization	176	175	513	498
Provision for receivables	61	49	207	114
Provision for inventory	15	16	44	59
Net gain on sales of businesses and assets	(6)	0	(15)	(22)
Undistributed equity in net income of unconsolidated affiliates	(12)	(31)	(6)	(60)
Stock-based compensation	23	26	54	66
Provision for litigation, net	0	0	0	795
Payments for securities litigation, net	0	0	(28)	0
Restructuring and asset impairment charges	(2)	14	(5)	80
Payments for restructurings	(66)	(33)	(231)	(92)
Contributions to pension benefit plans	(38)	(205)	(97)	(271)
Decrease (increase) in accounts receivable and billed portion of finance receivables	5	(60)	310	(128)
Decrease (increase) in inventories	77	(10)	159	(175)
Increase in equipment on operating leases	(58)	(81)	(185)	(242)
Decrease in finance receivables	116	99	347	319
Decrease in other current and long-term assets	17	24	61	18
Increase (decrease) in accounts payable and accrued compensation	138	94	(135)	(49)
Increase (decrease) in other current and long-term liabilities	9	(85)	(129)	(132)
Net change in income tax assets and liabilities	26	(15)	60	(302)
Net change in derivative assets and liabilities	22	(1)	(46)	9
Other operating, net	(22)	17	38	13
Net cash provided by operating activities	610	260	1,241	754
Cash Flows from Investing Activities:
Cost of additions to land, buildings and equipment	(21)	(43)	(69)	(142)
Proceeds from sales of land, buildings and equipment	7	1	16	37
Cost of additions to internal use software	(19)	(42)	(75)	(102)
Acquisitions, net of cash acquired	0	(11)	(145)	(153)
Net change in escrow and other restricted investments	1	(266)	(2)	(403)
Other investing, net	1	5	1	57
Net cash used in investing activities	(31)	(356)	(274)	(706)
Cash Flows from Financing Activities:
Net payments on secured financings	(10)	(45)	(50)	(192)
Net (payments) proceeds on other debt	(605)	329	(871)	900
Common stock dividends	(37)	(37)	(112)	(116)
Payments to acquire treasury stock, including fees	0	(92)	0	(804)
Repurchases related to stock-based compensation	0	0	(11)	(33)
Other financing, net	(2)	(2)	(10)	(6)
Net cash (used in) provided by financing activities	(654)	153	(1,054)	(251)
Effect of exchange rate changes on cash and cash equivalents	13	(27)	17	(23)
(Decrease) increase in cash and cash equivalents	(62)	30	(70)	(226)
Cash and cash equivalents at beginning of period	1,221	843	1,229	1,099
Cash and cash equivalents at end of period	$1,159	$873	$1,159	$873

Basis of Presentation

Basis of Presentation
	9 Months Ended Sep. 30, 2009 USD / shares
Basis of Presentation
Basis of Presentation	Note 1 - Basis of Presentation References herein to we, us, our, the Company and Xerox refer to Xerox Corporation and its consolidated subsidiaries unless the context specifically requires otherwise. We have prepared the accompanying unaudited Condensed Consolidated Financial Statements in accordance with the accounting policies described in our 2008 Annual Report to Shareholders, which is incorporated by reference in our 2008 Annual Report on Form 10-K (2008 Annual Report), and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in our annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. You should read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements included in our 2008 Annual Report. In our opinion, all adjustments which are necessary for a fair statement of financial position, operating results and cash flows for the interim periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year. For convenience and ease of reference, we refer to the financial statement caption Income (Loss) before Income Taxes and Equity Income as Pre-tax Income (Loss). On January 1, 2009, we adopted SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51, (Accounting Standards Codification (ASC) Topic 810-10-65) which changed the presentation requirements for noncontrolling (minority) interests. Refer to Note 2 Recent Accounting Pronouncements Business Combinations and Noncontrolling Interests for more information.

Recent Accounting Pronouncement

Recent Accounting Pronouncements
	9 Months Ended Sep. 30, 2009 USD / shares
Recent Accounting Pronouncements
Recent Accounting Pronouncements	Note 2 - Recent Accounting Pronouncements FASB Establishes Accounting Standards Codification In June 2009, the FASB issued Accounting Standards Update No. 2009-01, Generally Accepted Accounting Principles (ASC Topic 105) which establishes the FASB Accounting Standards Codification (the Codification or ASC) as the official single source of authoritative U.S. generally accepted accounting principles (GAAP). All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (SEC) guidance organized using the same topical structure in separate sections within the Codification. Following the Codification, the Board will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates (ASU) which will serve to update the Codification, provide background information about the guidance and provide the basis for conclusions on the changes to the Codification. The Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for our third-quarter 2009 financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification. In order to ease the transition to the Codification, we are providing the Codification cross-reference alongside the references to the standards issued and adopted prior to the adoption of the Codification. Fair Value Accounting In 2006, the FASB issued SFAS No. 157, Fair Value Measurements (ASC Topic 820) which defines fair value, establishes a market-based framework or hierarchy for measuring fair value and expands disclosures about fair value measurements.This guidance is applicable whenever another accounting pronouncement requires or permits assets and liabilities to be measured at fair value.It does not expand or require any new fair value measures; however the application of this statement may change current practice. We adopted this guidance for financial assets and liabilities effective January 1, 2008 and for non financial assets and liabilities effective January 1, 2009.The adoption, which primarily affected the valuation of our derivative contracts, did not have a material effect on our financial condition or results of operations. In April 2009, the FASB issued the following updates that provide additional application guidance and enhance disclosures regarding fair value measurements and impairments of securities: FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (ASC Topic 820-10-65). This update relates to determining fair values when there is no active market or where the price inputs being used represent distressed sales. It reaffirms the need to exercise judgment to ascertain if a former

Segment Reporting

Segment Reporting
	9 Months Ended Sep. 30, 2009 USD / shares
Segment Reporting
Segment Reporting	Note 3 - Segment Reporting Our reportable segments are consistent with how we manage the business and view the markets we serve. Our reportable segments are Production, Office and Other. The Production and Office segments are centered on strategic product groups that share common technology, manufacturing and product platforms, as well as classes of customers. The Production segment includes black-and-white products which operate at speeds over 90 pages per minute (ppm) excluding 95 ppm with an embedded controller and color products which operate at speeds over 40 ppm excluding 50, 60 and 70 ppm products with an embedded controller.Products include the Xerox iGen3 and iGen4 digital color production press, Xerox Nuvera, DocuTech, DocuPrint and DocuColor families, as well as older technology light-lens products.These products are sold predominantly through direct sales channels to Fortune 1000, graphic arts, government, education and other public sector customers. The Office segment includes black-and-white products which operate at speeds up to 90 ppm as well as 95 ppm with an embedded controller and color products up to 40 ppm as well as 50, 60 and 70 ppm products with an embedded controller. Products include the suite of CopyCentre, WorkCentre, WorkCentre Pro, Phaser and ColorQube digital multifunction systems, DocuColor color multifunction products, color laser, solid ink color printers and multifunction devices, monochrome laser desktop printers, digital and light-lens copiers and facsimile products and non-Xerox branded products with similar specifications. These products are sold through direct and indirect sales channels to global, national and mid-size commercial customers as well as government, education and other public sector customers. The segment classified as Other includes several units, none of which met the thresholds for separate segment reporting. This group primarily includes Xerox Supplies Business Group (predominantly paper sales), Value-Added Services, Wide Format Systems, Xerox Technology Enterprises, royalty and licensing revenues, GIS network integration solutions and electronic presentation systems, equity net income and non-allocated Corporate items. Other segment profit (loss) includes the operating results from these entities, other less significant businesses, our equity in net income from Fuji Xerox and certain costs which have not been allocated to the Production and Office segments, including non-financing interest as well as other items included in Other expenses, net. Operating segment revenues and profitability for the three months ended September 30, 2009 and 2008 were as follows: Production Office Other Total 2009 Segment revenues $ 1,092 $ 2,070 $ 513 $ 3,675 Segment profit (loss) $ 59 $ 201 $ (71 ) $ 189 2008 Segment revenues $ 1,272 $ 2,446 $ 652 $ 4,370 Segment profit (loss) $ 83 $ 260 $ (46 ) $ 297 Operating segment revenues and profitability for the nine months ended September 30, 2009 and 2008 were as follows:

Acquisition

Acquisition
	9 Months Ended Sep. 30, 2009 USD / shares
Acquisitions
Acquisition	Note 4Acquisitions In September 2009, we entered into a definitive agreement to acquire Affiliated Computer Services (ACS) in a cash and stock transaction. Upon completion of the acquisition, each outstanding share of ACS common stock will be converted into the right to receive a combination of 4.935 shares of Xerox common stock and $18.60 in cash for a combined value of $57.09 per share, or approximately $6.1 billion; based on the closing price of Xerox common stock of $7.80 on October 19, 2009. We will also assume ACSs debt, which was $2.3 billion as of September 30, 2009, and issue convertible preferred stock with a liquidation value of $300 to ACSs Class B shareholder.The cash portion of the acquisition, as well as the repayment of approximately $1.8 billion of ACSs assumed debt is expected to be funded through a combination of cash-on-hand, borrowing under our existing Credit Facility and the issuance of senior notes in the capital markets. In October 2009, we completed a successful syndication of a $3.0 billion interim Bridge Loan Facility with commitments from several banks that may be used for funding in the event the transaction closes prior to obtaining permanent financing in the capital markets. The Bridge Loan Facility will mature on the first anniversary of the closing date of the ACS acquisition, subject to two extensions: 1) for up to $1.5 billion to the second anniversary of the closing date, and 2) for up to $750 to the third anniversary of the closing date. Debt issuance costs for the Bridge Loan Facility are expected to be approximately $60 and will be amortized over the term of the Bridge Loan Facility.If it becomes probable that the bridge financing (or portions thereof) will not be used prior to the commitment expiration date (e.g., permanent financing is secured), the remaining unamortized portion of the commitment fee (or portions thereof) at the date of permanent financing will be immediately recognized through earnings as other expense. ACS is a provider of business process outsourcing (BPO) and information technology (IT) services and solutions to commercial and government clients worldwide.ACS delivers a full range of BPO and IT services, as well as end-to-end solutions to the public and private sectors and supports a variety of industries including education, energy, financial, government, healthcare, retail and transportation.ACSs revenues for the fiscal year ended June 30, 2009 were $6.5 billion, and they employed 74,000 people and operated in over 100 countries. The purchase price is expected to be primarily allocated to intangible assets and goodwill based on third-party valuations and managements estimates. The acquisition of ACS is expected to close in the first quarter of 2010, subject to shareholder and regulatory approvals, the satisfaction of certain conditions related to the debt financing for the transaction and other usual and customary closing conditions. In February 2009, Global Imaging Systems, Inc. (GIS) acquired ComDoc, Inc. (ComDoc) for approximately $145 in cash. ComDoc is one of the larger independent office technology dealers in the U.S. and expands GISs coverage in Ohio, Penns

Inventories

Inventories
	9 Months Ended Sep. 30, 2009 USD / shares
Inventories
Inventories	Note 5 - Inventories The following is a summary of Inventories by major category: September 30, 2009 December 31, 2008 Finished goods $ 913 $ 1,044 Work-in-process 54 80 Raw materials 102 108 Total Inventories $ 1,069 $ 1,232

Investment in Fuji Xerox and Ot

Investment in Fuji Xerox and Other Unconsolidated Affiliates
	9 Months Ended Sep. 30, 2009 USD / shares
Investment in Fuji Xerox and Other Unconsolidated Affiliates
Investment in Fuji Xerox and Other Unconsolidated Affiliates	Note 6 - Investment in Fuji Xerox and Other Unconsolidated Affiliates Our equity in net income of our unconsolidated affiliates was as follows: Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Fuji Xerox $ 13 $ 32 $ 6 $ 84 Other investments 2 3 8 8 Total $ 15 $ 35 $ 14 $ 92 Condensed financial data of Fuji Xerox was as follows: Three Months Ended September 30, Nine Months Ended September 30, Summary of Operations 2009 2008 2009 2008 Revenues $ 2,442 $ 2,716 $ 7,364 $ 8,420 Costs and expenses 2,363 2,512 7,331 7,785 Income before income taxes 79 204 33 635 Income taxes 26 78 244 Net Income 53 126 33 391 Noncontrolling interests 1 5 Net Income Attributable to Fuji Xerox $ 53 $ 125 $ 33 $ 386 Equity in net income of Fuji Xerox is affected by certain adjustments to reflect the deferral of profit associated with intercompany sales. These adjustments may result in recorded equity income that is different from that implied by our 25% ownership interest.Equity income for the nine months ended September 30, 2009 and 2008 includes after-tax restructuring charges of $40 and $15, respectively, primarily reflecting Fuji Xeroxs continued cost-reduction initiatives.

Restructuring Programs

Restructuring Programs
	9 Months Ended Sep. 30, 2009 USD / shares
Restructuring Programs
Restructuring Programs	Note 7 - Restructuring Programs Information related to restructuring program activity during the nine months ended September 30, 2009 is outlined below. Severance and Related Costs Lease Cancellation and Other Costs Total Balance December 31, 2008 $ 320 $ 32 $ 352 Restructuring provision 28 8 36 Reversals of prior accruals (38 ) (3 ) (41 ) Net current period charges(1) (10 ) 5 (5 ) Charges against reserve and currency (219 ) (12 ) (231 ) Balance September 30, 2009 $ 91 $ 25 $ 116 (1) Represents net amount recognized within the Condensed Consolidated Statements of Income for the period shown. Reconciliation to the Condensed Consolidated Statements of Cash Flows: Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Charges to reserve, all programs $ (65 ) $ (40 ) $ (231 ) $ (96 ) Effects of foreign currency and other non-cash (1 ) 7 4 Payments for Restructurings $ (66 ) $ (33 ) $ (231 ) $ (92 ) The following table summarizes the total amount of costs incurred in connection with these restructuring programs by segment: Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Production $ (1 ) $ 10 $ (3 ) $ 39 Office 3 (2 ) 32 Other (1 ) 1 9 Total Net Charges $ (2 ) $ 14 $ (5 ) $ 80

Debt

Debt
	9 Months Ended Sep. 30, 2009 USD / shares
Debt
Debt	Note 8 Debt Senior Notes In May 2009, we issued $750 of 8.25% senior notes due 2014 (the 2014 Senior Notes) at 99.982 percent of par resulting in net proceeds of approximately $745. The 2014 Senior Notes accrue interest at the rate of 8.25% per annum, payable semi-annually and, as a result of the discount, have a weighted average effective interest rate of 8.25%. Debt issuance costs of approximately $5 were deferred. The 2014 Senior Notes rank equally with our other existing senior unsecured indebtedness. Proceeds from the offering were used to repay borrowings under the Credit Facility and for general corporate purposes. Zero Coupon Notes In July 2009, we repaid a $300 Zero Coupon Note. The total repayment of $336 included interest accretion of $36. This Note was repaid when the holders exercised a put option to redeem the bond prior to the scheduled maturity date of July 30, 2022. In August 2009, we repaid a $100 Zero Coupon Note. The total repayment of $112 included interest accretion of $12. This Note was repaid when the holder exercised a put option to redeem the bond prior to the scheduled maturity date of August 29, 2022. Credit Facility In April 2009, we amended our $2 billion Credit Facility with affiliates of Citibank, N.A. and JPMorgan Chase Bank, N.A., as joint lead arrangers and joint bookrunners, and a group of lenders.The amendment increased the permitted leverage ratio (principal debt/consolidated EBITDA) to 4.25x through June 30, 2010 and retained 3.75x thereafter.The amendment included a re-pricing of the Credit Facility such that borrowings will bear interest at LIBOR plus a spread (including fees) that varies between 2.50% and 4.50%, subject to our credit rating at the time of borrowing. In October 2009, in connection with entering into the Bridge Loan Facility as part of the acquisition of ACS, we again amended our $2 billion Credit Facility. The amendment extended the permitted leverage ratio of 4.25x through September 30, 2010, which will change to 4.00x through December 31, 2010, and to 3.75x thereafter. The amendment also included the following changes: The definition of principal debt was changed such that prior to the closing of the ACS acquisition, it will be calculated net of cash proceeds from certain debt issuances associated with the pre-funding of the ACS acquisition. A portion of the Credit Facility that had a maturity date of April 30, 2012 was extended to a maturity date of April 30, 2013, consistent with the remainder of the facility.Accordingly, after this amendment, approximately $1.6 billion, or approximately 80% of the Credit Facility, has a maturity date of April 30, 2013. Based on our current credit rating, the applicable all-in spread for the Credit Facility would be 3.50%.

Interest Expense and Income

Interest Expense and Income
	9 Months Ended Sep. 30, 2009 USD / shares
Interest Expense and Income
Interest Expense and Income	Note 9 - Interest Expense and Income Interest expense and interest income were as follows: Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Interest expense(1) $ 131 $ 146 $ 392 $ 424 Interest income(2) 182 205 551 642 _________ (1) Includes Equipment financing interest expense, as well as non-financing interest expense that is included in Other expenses, net in the Condensed Consolidated Statements of Income. (2) Includes Finance income, as well as other interest income that is included in Other expenses, net in the Condensed Consolidated Statements of Income.

Financial Instruments

Financial Instruments
	9 Months Ended Sep. 30, 2009 USD / shares
Financial Instruments
Derivative Instruments and Hedging Activities	Note 10 - Financial Instruments (1)Interest Rate Risk Management We use interest rate swap agreements to manage our interest rate exposure and to achieve a desired proportion of variable and fixed rate debt. These derivatives may be designated as fair value hedges or cash flow hedges depending on the nature of the risk being hedged. Fair Value Hedges For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item attributable to the hedged risk, are recognized in current earnings. As of September 30, 2009 and December 31, 2008, pay variable/receive fixed interest rate swaps with notional amounts of $1,375 and $675, and net asset fair values of $13 and $53, respectively, were designated and accounted for as fair value hedges. The swaps were structured to hedge the fair value of related debt by converting them from fixed rate instruments to variable rate instruments. No ineffective portion was recorded to earnings during 2009 or 2008. The following is a summary of our fair value hedges at September 30, 2009: Debt Instrument and Maturity Year Designated As Hedge Notional Amount Net Fair Value Weighted Average Interest Rate Paid Interest Rate Received Basis Senior Notes due 2012 2009 $ 475 $ 2 3.87 % 5.50 % Libor Senior Notes due 2013 2009 400 3.73 % 5.65 % Libor Senior Notes due 2014 2009 500 11 5.40 % 8.25 % Libor Total $ 1,375 $ 13 Cash Flow Hedges We have a pay fixed/receive variable interest rate swap with a notional amount of $150 and a net liability fair value of $1 and $2 at September 30, 2009 and December 31, 2008, respectively, that was designated and accounted for as a cash flow hedge. This swap was structured to hedge the LIBOR interest rate of the floating Senior Notes due 2009 by converting it from a variable rate instrument to a fixed rate instrument. No ineffective portion was recorded to earnings for the nine months ended September 30, 2009, and all components of the derivative gain or loss were included in the assessment of hedged effectiveness. Terminated Swaps There were no swaps terminated during the three months ended June 30 and September 30, 2009, which were designated as fair value hedges. During the three months ended March 31, 2009, interest rate swaps which had been designated as fair value hedges of certain debt instruments were terminated. These terminated interest rate swaps had an aggregate notional value of $675. The associated net fair value adjustment of $(34) to the debt instruments is being amortized as an offset to interest expense over the remaining term of the related notes. (2)Foreign Exchange Risk Management Xerox is a global company that is exposed to foreign currency exchange rate fluctuations in the normal course of its business. As a part of our foreign exchange risk management strategy, we use derivative instruments, primarily forward contracts, to
Fair Value of Other Assets & Liabilities Not Measured at Fair Value on a Recurring Basis	Summary of Other Assets Liabilities Not Measured at Fair Value on a Recurring Basis The estimated fair values of our other financial assets and liabilities not measured at fair value on a recurring basis were as follows: September 30, 2009 December 31, 2008 Carrying Amount Fair Value Carrying Amount Fair Value Cash and cash equivalents $ 1,159 $ 1,159 $ 1,229 $ 1,229 Accounts receivable, net 1,863 1,863 2,184 2,184 Short-term debt 1,149 1,167 1,610 1,593 Long-term debt 6,297 6,478 6,774 5,918 Liability to subsidiary trust issuing preferred securities 649 643 648 555 The fair value amounts for Cash and cash equivalents and Accounts receivable, net approximate carrying amounts due to the short maturities of these instruments. The fair value of Short and Long-term debt, as well as our Liability to subsidiary trust issuing preferred securities, was estimated based on quoted market prices for publicly traded securities or on the current rates offered to us for debt of similar maturities. The difference between the fair value and the carrying value represents the theoretical net premium or discount we would pay or receive to retire all debt at such date.

Employee Benefit Plans

Employee Benefit Plans
	9 Months Ended Sep. 30, 2009 USD / shares
Employee Benefit Plans
Employee Benefit Plans	Note 11 - Employee Benefit Plans The components of Net periodic benefit cost and other amounts recognized in Other comprehensive income were as follows: Three Months Ended September 30, Nine Months Ended September 30, Pension Benefits Retiree Health Pension Benefits Retiree Health 2009 2008 2009 2008 2009 2008 2009 2008 Net periodic benefit cost: Service cost $ 44 $ 53 $ 1 $ 4 $ 129 $ 160 $ 5 $ 12 Interest cost 128 142 15 22 371 430 46 67 Expected return on plan assets (132 ) (164 ) (382 ) (495 ) Recognized net actuarial loss 6 9 18 28 1 Amortization of prior service credit (5 ) (4 ) (10 ) (3 ) (16 ) (14 ) (31 ) (9 ) Recognized settlement loss 27 6 55 17 Net periodic benefit cost 68 42 6 23 175 126 20 71 Other changes in plan assets and benefit obligations recognized in Other comprehensive income: Amortization of net prior service credit 5 5 10 3 16 15 31 9 Amortization of net actuarial losses (33 ) (15 ) (73 ) (45 ) (1 ) Total recognized in Other comprehensive income(1) (28 ) (10 ) 10 3 (57 ) (30 ) 31 8 Total recognized in Net periodic benefit cost and Other comprehensive income $ 40 $ 32 $ 16 $ 26 $ 118 $ 96 $ 51 $ 79 ________________ (1) Amount represents the pre-tax effect included within Other comprehensive income. The amount, net of tax, is included within Note 12, Shareholders Equity. During the nine months ended September 30, 2009, we made contributions of $97 and $82 to our pension plans and our other post-retirement benefit plans, respectively. We presently anticipate contributing an additional $21 to our pension plans and $27 to our other post-retirement benefit plans in 2009 for a total of $118 for pension plans and $109 for other post-retirement benefit plans.

Shareholders' Equity

Shareholders' Equity
	9 Months Ended Sep. 30, 2009 USD / shares
Shareholder Equity
Shareholder's Equity	Note 12 Shareholders Equity (in millions, except share data in thousands) Common Stock Amount Additional Paid-In Capital Treasury Stock Amount Retained Earnings AOCL(1) Xerox Shareholders Equity Non- controlling Interests Total Equity Balance at December 31, 2008 $ 866 $ 2,447 $ 5,341 $ (2,416 ) $ 6,238 $ 120 $ 6,358 Net income 305 305 20 325 Translation adjustments 590 590 590 Changes in defined benefit plans(2) (140 ) (140 ) (140 ) Other unrealized losses, net (1 ) (1 ) (1 ) Comprehensive Income $ 754 $ 20 $ 774 Cash dividends declared-commonstock ($0.0425 per share per quarter) (114 ) (114 ) (114 ) Stock option and incentive plans, net 4 37 41 41 Tax loss on stock option and incentive plans, net (21 ) (21 ) (21 ) Distributions to noncontrolling interests (7 ) (7 ) Balance at September 30, 2009 $ 870 $ 2,463 $ $ 5,532 $ (1,967 ) $ 6,898 $ 133 $ 7,031 Balance at December 31, 2007 $ 920 $ 3,176 $ (31 ) $ 5,288 $ (765 ) $ 8,588 $ 103 $ 8,691 Net income 229 229 27 256 Translation adjustments (453 ) (453 ) (1 ) (454 ) Changes in defined benefit plans (2) 35 35 35 Comprehensive (Loss) Income $ (189 ) $ 26 $ (163 ) Cumulative affect of change in accounting principles (25 ) 5 (20 ) (20 ) Cash dividends declared-commonstock ($0.0425 per share per quarter) (114 ) (114 ) (114 ) Stock option and incentive plans, net 4 36 40 40 Payments to acquire treasury stock 1 (804 ) (803 ) (803 ) Cancellation of treasury stock (51 ) (693 ) 744 Distributions to noncontrolling interests (11 ) (11 ) Balance

Earnings per Share

Earnings per Share
	9 Months Ended Sep. 30, 2009 USD / shares
Earnings per Share
Earnings per Share	Note 13 - Earnings per Share The following table sets forth the computation of basic and diluted earnings per share of common stock (shares in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2009 2008 2009 2008 Basic Earnings per Share: Net income attributable to Xerox $ 123 $ 258 $ 305 $ 229 Weighted average common shares outstanding 871,304 870,849 869,544 891,032 Basic Earnings per Share $ 0.14 $ 0.30 $ 0.35 $ 0.26 Diluted Earnings per Share: Net income attributable to Xerox $ 123 $ 258 $ 305 $ 229 Interest on Convertible securities, net Adjusted Net income available to common shareholders $ 123 $ 258 $ 305 $ 229 Weighted average common shares outstanding 871,304 870,849 869,544 891,032 Common shares issuable with respect to: Stock options 708 4,631 425 5,179 Restricted stock and performance shares 8,769 9,410 5,188 6,192 Convertible securities 1,992 1,992 Adjusted weighted average common shares outstanding 882,773 886,882 875,157 902,403 Diluted Earnings per Share $ 0.14 $ 0.29 $ 0.35 $ 0.25 Dividends per Common Share $ 0.0425 $ 0.0425 $ 0.1275 $ 0.1275 The computation of diluted earnings per share for the three and nine months ended September 30, 2009 did not include the effects of approximately 35 million shares and 49 million shares, respectively, because to do so would have been anti-dilutive.Similarly, the 2008 computation did not include the effects of approximately 30 million shares and 22 million shares, respectively.

Contingencies

Contingencies
	9 Months Ended Sep. 30, 2009 USD / shares
Contingencies
Contingencies	Note 14 - Contingencies Brazil Tax and Labor Contingencies Our Brazilian operations are involved in various litigation matters and have received or been the subject of numerous governmental assessments related to indirect and other taxes as well as disputes associated with former employees and contract labor. The tax matters, which comprise a significant portion of the total contingencies, principally relate to claims for taxes on the internal transfer of inventory, municipal service taxes on rentals and gross revenue taxes. We are disputing these tax matters and intend to vigorously defend our position. Based on the opinion of legal counsel and current reserves for those matters deemed probable of loss, we do not believe that the ultimate resolution of these matters will materially impact our results of operations, financial position or cash flows. The labor matters principally relate to claims made by former employees and contract labor for the equivalent payment of all social security and other related labor benefits, as well as consequential tax claims, as if they were regular employees. As of September 30, 2009, the total amounts related to the unreserved portion of the tax and labor contingencies, inclusive of any related interest, amounted to approximately $1,184 with the increase from December31, 2008 balance of approximately $839 primarily related to change in foreign currency exchange rate. In connection with the above proceedings, customary local regulations may require us to make escrow cash deposits or post other security of up to half of the total amount in dispute. As of September 30, 2009 we had $230 of escrow cash deposits for matters we are disputing and there are liens on certain Brazilian assets with a net book value of $21 and additional letters of credit of approximately $136. Generally, any escrowed amounts would be refundable and any liens would be removed to the extent the matters are resolved in our favor. We routinely assess all these matters as to probability of ultimately incurring a liability against our Brazilian operations and record our best estimate of the ultimate loss in situations where we assess the likelihood of an ultimate loss as probable. Legal Matters As more fully discussed below, we are involved in a variety of claims, lawsuits, investigations and proceedings concerning securities law, intellectual property law, environmental law, employment law and the Employee Retirement Income Security Act (ERISA).We determine whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable and can be reasonably estimated.We assess our potential liability by analyzing our litigation and regulatory matters using available information.We develop our views on estimated losses in consultation with outside counsel handling our defense in these matters, which involves an analysis of potential results, assuming a combination of litigation and settlement strategies.Should developments in any of these matters cause a change in our determination as to an unfavorable outcome and result in the need to recognize a material accrual, or should any of these matters result

Subsequent Event

Subsequent Event
	9 Months Ended Sep. 30, 2009 USD / shares
Subsequent Event
Subsequent Events	Note 15 Subsequent Events We have performed an evaluation of subsequent events through October 22, 2009, which is the date the financial statements were issued.

Document Information

Document Information
	9 Months Ended Sep. 30, 2009 USD / shares
Document Information Line Item
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2009-09-30

Entity Information

Entity Information (USD $)
	9 Months Ended Sep. 30, 2009	Jun. 30, 2009
Entity Information Line Items
Entity Registrant Name	XEROX CORP
Entity Central Index Key	0000108772
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Public Float		$5,631,647,939
Entity Common Stock, Shares Outstanding	869,244,662