Xerox Corporation Financial Profile

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					                                                                                                          Xerox Corporation – Financial Profile

                                                                                    Solid Track Record                                                                                                   Q4 2009 Overview

                                                                                                                                                                 Q4 Adjusted EPS 1 of $0.25 per share, GAAP EPS of $0.20
                                                                     Revenue and Adjusted Operating Margin 1
                                                                                                                                                                 per share. FY adjusted EPS $0.60 per share (GAAP $0.55)
                                                18,000                                                                         12.0%
                                                                                                                                                                 Cash performance exceeds expectations
                                                17,500                                                                                                             - Cash from operations $967M, $2.2B full year
Total Revenue (in millions$)




                                                                                                                               10.0%
                                                                                                                                                                   - Cash Balance4 of $3.8B




                                                                                                                                       Operating Margin (%)
                                                17,000
                                                16,500                                                                         8.0%
                                                                                                                                                                   - FY debt reduction4 of $1.1B
                                                16,000
                                                15,500
                                                                                                                               6.0%                              Total revenue grew sequentially; YOY down 3%,7%CC 1
                                                15,000                                                                         4.0%                               - Post-sale flat, down 4%CC1
                                                14,500
                                                                                                                               2.0%
                                                                                                                                                                     - Equipment down 11%, 15%CC1
                                                14,000                                                                                                               - Revenue remains weak but trends improving
                                                13,500                                                                         0.0%
                                                                         2005       2006          2007           2008   2009
                                                                                                                                                                 Strong operational cost and expense execution
                                                                                                                                                                     - Gross Margin improved 2.0 points YOY to 39.9%
                                                                                    Revenue          Operating margin
                                                                                                                                                                     - SAG percent of revenue 26.7%
                                                                                                                                                                     - Captured savings from restructuring and cost actions
                                                                          Adjusted Cash from Operations 1 and
                                                                                                                                                                                                          2010 Guidance
                                                                                  Adjusted FCF Yield 1
                                                                                                                                                                 Earnings:
                                                             2,500                                                             30.0%
                                                                                                                                                                 GAAP EPS      $0.36 - $0.46
                       Cash from Operations (in millions$)




                                                             2,000
                                                                                                                               25.0%                             Adjusted EPS1 $0.75 - $0.85
                                                                                                                                                                 Cash from Operations: ~$2.6B
                                                                                                                               20.0%
                                                                                                                                            FCF Yield (%)


                                                             1,500
                                                                                                                                                              (in millions, except per share data)                    FY 2008     Q4 '09      FY 2009
                                                                                                                               15.0%
                                                             1,000
                                                                                                                                                              Income Statement                                         Actual     Actual       Actual
                                                                                                                               10.0%
                                                                                                                                                              Revenue                                                 $17,608     $4,219       $15,179
                                                              500                                                                                                                                    1
                                                                                                                               5.0%
                                                                                                                                                              Adjusted Gross Margin                                      39.2%     39.9%         39.7%
                                                                0                                                              0.0%
                                                                                                                                                              R,D&E                                                       $884      $225          $840
                                                                         2005        2006          2007          2008   2009
                                                                                              Cash from Operations
                                                                                                                                                              R,D&E % Revenue                                             5.0%      5.3%          5.5%
                                                                                              Adjusted FCF Yield                                              SAG                                                       $4,534    $1,125        $4,149
                                                                                                                                                              SAG % Revenue                                              25.7%     26.7%         27.3%
                                                                                                                                                              Other, Net (incl. noncontrolling interests)               $1,122       $89          $376
                                                                                Balanced Debt Maturities                                                      Acquisition related costs                                     -        $63           $72
                                                                                      Debt Ladder                                                             Restructuring                                               $429        ($3)          ($8)
                                                              1,600                                                                                           Adjusted Net Income - Xerox1                                $985      $221          $526
                                                                                                                                                              Equity Income                                               $113       $27           $41
                                                                                                                                                                                                1
                                                              1,200                                                                                           Adjusted Effective Tax Rate                                  23%       16%           24%
                                             $ millions




                                                                                                                                                                             1
                                                                                                                                                              Adjusted EPS                                               $1.10     $0.25         $0.60
                                                                 800
                                                                                                                                                              After Tax Adjustments:
                                                                                                                                                                Restructuring                                           ($0.27)
                                                                 400
                                                                                                                                                                Equipment write off                                     ($0.03)
                                                                                                                                                                Provision for Litigation, Net                           ($0.54)
                                                                     0
                                                                           10 011     12 013 014             15 016        8   +                                Acquisition related costs                                          ($0.05)      ($0.05)
                                                                                                                      17 01 019
                                                                         20   2     20   2   2             20   2   20   2   2                                GAAP EPS                                                   $0.26      $0.20        $0.55
                                                                           15 yr putable notes5                                                               Other Metrics
                                                                                                                                                                                                                     FY 2008      Q4 '09     YTD 2009
                                                                                                                                                              Cash & Cash Equivalents                                     $1.2B     $3.8B         $3.8B
            1 - See Non-GAAP Financial Measures for explanation                                                                                                                            1
                                                                                                                                                              Adjusted Cash from Operations                           $1,554M      $967M       $2,208M
            2- Dividend yield as of the end of the reporting period                                                                                           Annualized Dividend Yield
                                                                                                                                                                                        2
                                                                                                                                                                                                                         2.13%     2.01%         2.01%
            3 - MIF (Machines in Field) excludes printers, developing markets & GIS.
                                                                                                                                                              Credit Rating
            Digital revenue excludes GIS. Pages includes estimates for developing
            markets, GIS and printers.
                                                                                                                                                                Moody’s                                               Baa2        Baa2         Baa2
            4 - Cash includes and debt excludes $2B in debt issues December 2009                                                                                Standard & Poors (“S&P”)                              BBB         BBB          BBB -
            to fund ACS acquisition.                                                                                                                            Fitch                                                 BBB         BBB          BBB
            5 - 2010 assumes $267M put under private placements (final maturity                                                                                                                  Post Sale
            2023)                                                                                                                                                                                                 Q4 '09
                                                                                                                                                                                                             C olor   D igital
                                                                                                                                                              Revenue @ CC 1                                  1%       (3)%
                                                                                                                                                                  3
                                                                                                                                                              MIF                                            17%        1%
                                                                                                                                                              P ages3                                         4%       (8)%
 Non-GAAP Financial Measures
  “Adjusted Net Income and EPS”: To better understand the trends in our business, we believe that it is helpful to adjust diluted earnings per share and net income for the full year 2008, fourth quarter and
  full year 2009 to exclude the effect of the (1) Charges associated with restructuring in fourth quarter 2008; (2) Charges associated with an equipment write-off in fourth quarter 2008; (3) Charges relating
  to securities-related litigation matters in first quarter 2008; and (4) Costs related to the acquisition of ACS in fourth quarter 2009. Management believes that excluding the effects of these items enables
  investors to better understand and analyze the current periods’ results and provides a better measure of comparability given the discrete nature of these charges. A reconciliation of these non-GAAP financial
  measures and the most directly comparable measures calculated and presented in accordance with GAAP are set forth on Table 1.

  “Constant Currency”: To better understand trends in our business, we believe that it is helpful to adjust revenue to exclude the impact of changes in the translation of foreign currencies into U.S. dollars. We
  refer to this adjusted revenue as “constant currency.” Currencies for developing market countries (Latin America, Brazil, Middle East, India, Eurasia and Central-Eastern Europe) that we operate in are
  reported at actual exchange rates for both actual and constant revenue growth rates because (1) these countries historically have had volatile currency and inflationary environments and (2) our
  subsidiaries in these countries have historically taken pricing actions to mitigate the impact of inflation and devaluation. Management believes the constant currency measure provides investors an
  additional perspective on revenue trends. Currency impact can be determined as the difference between actual growth rates and constant currency growth rates.

  “Adjusted Gross Margin”/"Adjusted Operating Income"/"Adjusted Operating Margin": To better understand trends in our business, we believe it is helpful to adjust these items for the full year 2008 to
  exclude the effect of charges associated with an equipment write-off in fourth quarter 2008. Management believes that excluding the effect of this charge will enable investors to better understand and
  analyze the current periods’ results and provide a better basis for assessing future trends because of the discrete nature of the equipment write-off charge. A reconciliation of these non-GAAP financial
  measures and the most directly comparable financial measures calculated and presented in accordance with GAAP is set forth on Tables 2 and 5

  “Free Cash Flow”: To better understand the trends in our business, we believe that it is helpful to adjust cash flows from operations to exclude amounts for certain capital expenditures including internal use
  software. Management believes this measure gives investors an additional perspective on cash flow from operating activities in excess of amounts required for reinvestments. It provides a measure of our
  ability to fund acquisitions, dividends and share repurchase. It also is used to measure our yield on market capitalization. See reconciliation of Cash from Operations to Free Cash Flow in Table 3.

  “Adjusted Cash from Operations” / “Adjusted Free Cash Flow”: To better understand the trends in our business, we believe that it is helpful to adjust Cash from Operations / Free Cash Flow to exclude the
  fourth quarter 2008 net payments made for the securities-related litigation matters. Management believes that excluding the effects of these payments helps investors better understand and analyze the
  current periods’ results given the nature and size of the payments and their relation to prior period events. A reconciliation of these non-GAAP financial measures and the most directly comparable measures
  calculated and presented in accordance with GAAP is set forth on Table 3.

  “Adjusted Effective Tax Rate”: To better understand the trends in our business, we believe that it is helpful to adjust the effective tax rate for the full year 2008, fourth quarter 2009 and full year 2009 to
  exclude (1) the tax effects of the first quarter 2008 securities-related litigation provision; (2) the second, third and fourth quarter 2008 restructuring and asset impairment charges; (3) the fourth quarter
  2008 equipment write-off charge; (4) the benefit from the settlement of certain previously unrecognized tax benefits in 2008; and (5) the fourth quarter 2009 costs related to the acquisition of ACS.
  Management believes that excluding the tax effects of this item will enable investors to better understand and analyze the current periods’ effective tax rate given the discrete nature of these items in the
  respective period. A reconciliation of this non-GAAP financial measure to the most directly comparable financial measure calculated and presented in accordance with GAAP is set forth on Table 4.

  “2010 Guidance - Adjusted EPS”: To better understand the trends in our business and the impact of the ACS acquisition post-closing, we believe it is necessary to adjust first quarter and full year 2010
  diluted earnings per share to exclude the effects of the following items: (1) the amortization of purchased intangible assets; (2) restructuring and asset impairment charges including those incurred by Fuji
  Xerox; and (3) acquisition related costs. In addition, we have also excluded the loss associated with the Venezuela devaluation given the discrete nature of this loss. Management believes that excluding the
  effects of these items enables investors to better understand and analyze the impact of the ACS acquisition as well as results for a particular period as compared to prior periods. Management also expects
  to use this non-GAAP financial measure in its own evaluation of the Company’s performance in 2010, particularly when comparing performance to prior periods. A reconciliation of these non-GAAP financial
  measures and the most directly comparable measures calculated and presented in accordance with GAAP are set forth on Table 6.

  All non-GAAP financial measures should be viewed in addition to, and not as a substitute for, the Company's reported results prepared in accordance with GAAP. A reconciliation of these non-GAAP financial
  measures and the most directly comparable financial measures calculated and presented in accordance with GAAP is set forth in the relevant tables.




 Non-GAAP Reconciliation
                                                 Table 1 - Adjusted Net Income and EPS                                                                                             Table 4 - Adjusted Effective Tax Rate
                                                                     FY 2008                Q4 2009                        FY 2009                                                                                                Q4 2008
                                                                                                                                                                                                              Pre-Tax                                Effective Tax
                                                                Net                       Net                        Net
                                                                                                                                             Adjusted Effective Tax Rate                                      Income          Income Taxes               Rate
                                                              Income -                 Income -                    Income -                  (in millions)
Adjusted Net Income/EPS                                        Xerox        EPS          Xerox       EPS            Xerox          EPS
                                                                                                                                             As Reported                                                  $           (71)    $         (59)                83.1%
(in millions, except per share data)                                                                                                           Q4 2008 Restructuring & asset impairment charges                       349               109
As Reported                                                   $     230 $     0.26     $    180 $         0.20     $      485 $       0.55     Q4 2008 Equipment write-off                                             39                15

  Q4 2008 Restructuring and asset impairment charges                240       0.27                                                           As Adjusted                                                  $           317     $             65              20.5%
  Q4 2008 Equipment write-off                                        24       0.03                                                                                                                                                Q4 2009
  Q1 2008 Provision for litigation matters                          491       0.54
  Q4 2009 Acquisition related costs                                                         41            0.05             41         0.05                                                                    Pre-Tax                                Effective Tax
                                                                                                                                             Adjusted Effective Tax Rate                                      Income          Income Taxes               Rate
As Adjusted                                                   $     985 $     1.10     $    221 $         0.25     $      526 $       0.60 (in millions)
                                                                                                                                             As Reported                                                  $           194     $             30              15.5%
                                       Table 2 - Adjusted Operating Income and Operating Margin                                                Q4 2009 Acquisition related costs                                       63                   22
(in millions)                                                  2005          2006         2007                   2008           2009         As Adjusted                                                  $           257     $             52              20.2%
Revenue                                                        $15,701        $15,895       $17,228              $17,608        $15,179                                                                                           FY 2009
                                                                                                                                                                                                              Pre-Tax                                Effective Tax
Income before Income Taxes and Equity Income                                                                                                 Adjusted Effective Tax Rate                                      Income          Income Taxes               Rate
and non-controlling interests (Pre-tax Income)                     $845             $830      $1,468                ($79)            $627    (in millions)
  Restructuring and asset impairment charges                        366              385          (6)                429               (8)   As Reported                                                  $           627     $        152                  24.2%
                                                                                                                                               Q4 2009 Acquisition related costs                                       63               22
  Other expenses, net                                               209              314         265               1,087              345
                                                                                                                                             As Adjusted                                                  $           690     $        174                  25.2%
  Equipment write-off                                                                                                 39
                                                                                                                                                                                   Table 5 - Adjusted Gross Margin
  Acquisition releated costs                                                                                                          72                                                                        Equipment
Adjusted Operating Income                                         $1,420       $1,529         $1,727              $1,476          $1,036      FY 2008:                                           As Reported     Write-off                       As Adjusted

Pre-tax Income margin                                                5.4%            5.2%          8.5%                -0.4%          4.1%    Revenue                                             $         17,608                               $       17,608
Adjusted Operating margin                                            9.0%            9.6%         10.0%                 8.4%          6.8%    Cost of revenue                                               10,753                   (39)                10,714
                                                                                                                                              Gross Profit                                                    6,855                   39                   6,894
                                                                                                                                               Gross Margin                                                   38.9%                                        39.2%
                                          Table 3 - Adjusted Free Cash Flow Yield
                                                                                                                                                                                   Table 6 - 2010 Adjusted EPS
(in millions)                                                 2005           2006           2007                 2008           2009                                                                                                             FY 2010
                                                                                                                                               (in millions; except per share amounts)                          Q1 2010
Cash from Operations                                              $1,420       $1,617         $1,871               $939           $2,208
                                                                                                                                               GAAP EPS                                                  $(0.11) - $(0.13)              $ 0.36 - $ 0.46
Payments for securities litigation, net                                                                              615
Adjusted Cash from Operations                                     $1,420       $1,617         $1,871              $1,554          $2,208       Adjustments:
                                                                                                                                               Acquisition Related Costs                                $                    0.02      $                     0.03
  CAPEX (including internal use software)                            237          294            359                 335             193
                                                                                                                                               Intangibles Amortization                                                      0.04                            0.17
Free Cash Flow (FCF)                                              $1,183       $1,323         $1,512               $604           $2,015       Xerox Restructuring Charge                                                    0.14                            0.15
                                                                                                                                               Fuji Xerox Restructuring Charge                                               0.02                            0.02
Adjusted Free Cash Flow                                           $1,183       $1,323         $1,512              $1,219          $2,015       Venezuela Devaluation                                                         0.02                            0.02
                                                                                                                                                                                                        $                    0.24      $                     0.39
Market Capitalization1                                    13,642               16,038         14,849               6,892           7,355
Adjusted FCF Yield                                           8.7%                 8.2%         10.2%               17.7%           27.4%       Adjusted EPS                                              $ 0.11 - $ 0.13                $ 0.75 - $ 0.85
1
  Year-end Share price x Shares of common stock outstanding
                                                                                                                                               Estimated Weighted Avg Shares                                            1,230                              1,360