Xerox 10-K 2010 FY Annual report

EXHIBIT 12

COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

The ratio of earnings to fixed charges and the ratio of earnings to combined fixed charges and preferred stock dividends, as well as any deficiency of earnings are determined using the following applicable factors:

Earnings available for fixed charges are calculated first, by determining the sum of: (a) income (loss) from continuing operations before income taxes and equity income; (b) distributed equity income; (c) fixed charges, as defined below; and (d) amortization of capitalized interest, if any. From this total, we subtract capitalized interest and net income attributable to noncontrolling interests.

Fixed charges are calculated as the sum of: (a) interest costs (both expensed and capitalized); (b) amortization of debt expense and discount or premium relating to any indebtedness; and (c) that portion of rental expense that is representative of the interest factor.

Preferred stock dividends used in the ratio of earnings to combined fixed charges and preferred stock dividends consist of the amount of pre-tax earnings required to cover dividends paid on our Series A convertible preferred stock issued in 2010 and our Series C mandatory convertible preferred stock. Series C mandatory convertible preferred stock was redeemed and converted to common stock as of July 3, 2006 and, as such, there were no dividends beyond such date.

	Year Ended December 31,
(in millions)	2010			2009			2008			2007			2006
Fixed charges:
Interest expense	$	592		$	527		$	567		$	579		$	544
Capitalized interest		5			8			10			8			—
Portion of rental expense which represents interest factor		211			89			84			95			90
Total Fixed charges	$	808		$	624		$	661		$	682		$	634
Earnings available for fixed charges:
Pre-tax income (loss)	$	815		$	627		$	(79	)	$	1,468		$	830
Distributed equity income of affiliated companies		41			16			60			37			44
Add: Fixed charges		808			624			661			682			634
Less: Capitalized interest		(5	)		(8	)		(10	)		(8	)		—
Less: Net income – noncontrolling interests		(31	)		(31	)		(35	)		(30	)		(22	)
Total Earnings available for fixed charges	$	1,628		$	1,228		$	597		$	2,149		$	1,486
Ratio of earnings to fixed charges		2.01			1.97			*			3.15			2.34

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividend:

	Year Ended December 31,
(in millions)	2010			2009			2008			2007			2006
Fixed charges:
Interest expense	$	592		$	527		$	567		$	579		$	544
Capitalized interest		5			8			10			8			—
Portion of rental expense which represents interest factor		211			89			84			95			90
Total Fixed charges before preferred stock dividends pre-tax requirements	$	808		$	624		$	661		$	682		$	634
Preferred stock dividends pre-tax income requirements		35			—			—			—			48
Total Combined fixed charges and preferred stock dividends	$	843		$	624		$	661		$	682		$	682
Earnings available for fixed charges:
Pre-tax income (loss)	$	815		$	627		$	(79	)	$	1,468		$	830
Distributed equity income of affiliated companies		41			16			60			37			44
Add: Fixed charges		808			624			661			682			634
Less: Capitalized interest		(5	)		(8	)		(10	)		(8	)		—
Less: Net income – noncontrolling interests		(31	)		(31	)		(35	)		(30	)		(22	)
Total Earnings available for fixed charges and preferred stock dividends	$	1,628		$	1,228		$	597		$	2,149		$	1,486
Ratio of earnings to fixed charges and preferred stock dividends		1.93			1.97			*			3.15			2.18

* Earnings for the year ended December 31, 2008 were inadequate to cover fixed charges by $64.