<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
( X ) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended: December 31, 1996
OR
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from : to
Commission file number: 1-8133
XEROX CREDIT CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 06-1024525
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 First Stamford Place, Stamford, Connecticut 06904
(Address of principal executive offices) (Zip Code)
(203) 325-6600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
10% Notes due 1999 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes: X No:
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Not Applicable
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the latest practicable date.
Class Outstanding as of February 28, 1997
Common Stock 2,000
THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS J(1)(a)
AND (b) OF FORM 10-K AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
THIS DOCUMENT CONSISTS OF 30 PAGES
(1)
<PAGE>
This Form 10-K contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management as well
as assumptions made by and information currently available to management.
The words "anticipate," "believe," "estimate," "expect," "intends" and
similar expressions, as they relate to the Company or the Company's
management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated or expected.
The Company does not intend to update these forward-looking statements.
PART I
ITEM 1. Business
Xerox Credit Corporation, a Delaware corporation (together with its
subsidiaries herein called the "Company" unless the context otherwise
requires), was organized on June 23, 1980. All of the Company's outstanding
capital stock is owned by Xerox Financial Services, Inc. ("XFSI"), a holding
company, which is wholly-owned by Xerox Corporation (Xerox Corporation
together with its subsidiaries are herein called "Xerox" unless the context
otherwise requires).
The Company is engaged in financing long-term accounts receivable
arising out of equipment sales by Xerox to its Document Processing customers
throughout the United States. Contract terms on these accounts receivable
range primarily from two to five years.
The Company purchases from Xerox all receivables due from commercial
customers and the Federal Government. New contracts are purchased monthly.
The Company pays Xerox an administration fee for providing billing and
collection services. The purchase price of the contract is calculated as the
present value of the future cash flows. The interest rates utilized to
discount the cash flows are determined by certain referenced interest rates
plus a prescribed spread. The interest rate utilized for the cost
calculation is adjusted monthly as each new set of contracts is purchased.
In 1990 the Company discontinued its real-estate development and
related real-estate financing businesses and its third-party financing and
leasing businesses. See Note 2 to the Consolidated Financial Statements for
further information regarding the Company's discontinued operations.
Xerox is The Document Company and a leader in the global document
market, providing document solutions that enhance business productivity.
Xerox' Document Processing activities encompass developing, manufacturing,
marketing, servicing and financing a complete range of document processing
products and services designed to make offices around the world more
productive. Xerox document processing products are principally sold directly
to users by Xerox' worldwide sales force of approximately 13,000 employees.
Xerox also markets through a network of independent agents, dealers,
distributors and value-added resellers and has arrangements with U.S. retail
marketing channels to market low-end products not generally suited for
distribution through the Xerox direct sales force. The financing of Xerox
equipment is generally carried out by the Company in the United States and
internationally by several foreign financing subsidiaries and divisions in
most countries in which Xerox operates.
(2)
<PAGE>
ITEM 2. Properties
The Company does not directly own any facilities in order to carry on
its principal business. Its principal executive offices in Stamford,
Connecticut are located in approximately 19,000 square feet of office space
leased by Xerox and shared by Xerox, XFSI and the Company. The Company uses
less than 1,000 square feet of the total office space. These facilities are
deemed adequate by management.
ITEM 3. Legal Proceedings
None.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not Required.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Because the Company is a wholly-owned subsidiary, there is no market
for its common shares. Dividends declared during the five years ended
December 31 were as follows
(in millions): 1992 - $85; 1993 - $59; 1994 - $88; 1995 - $149; 1996 - $97.
ITEM 6. Selected Financial Data
Not Required.
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Continuing Operations
Contracts receivable income represents income earned under an agreement
with Xerox pursuant to which the Company purchases long-term accounts
receivable associated with Xerox' sold equipment. These receivables arise
primarily from Xerox equipment being sold under installment sales and sales-
type leases. In 1996, the Company purchased receivables from Xerox totaling
$1,922 million compared to $1,539 million in 1995. The increase in
receivables purchases was due to increased United States sales in 1996
attributable to increased sales coverage by the Xerox United States Customer
Operations sales force and excellent customer acceptance of new Xerox digital
products. Earned income from contracts receivable decreased in 1996 to $340
million from $352 million in 1995 and $362 million in 1994. The decreases
were primarily due to (i) a smaller average portfolio of contracts receivable
in 1996 than in 1995 and in 1995 than in 1994, (ii) relatively lower
equipment sales by Xerox in the second half of 1995 resulting from a
realignment by the Xerox United States Customer Operations sales force and
(iii) a reduction in the interest rate spread on purchased contracts.
(3)
<PAGE>
Continuing Operations
Interest expense was $204 million in 1996 compared to $219 million in
1995, a decrease of $15 million. The 1996 decrease is principally
attributable to the smaller average portfolio of contracts receivable in
1996, the reduction of assets of discontinued operations in 1996 and the call
at par of $150 million of 10.125% in April, 1996. Assigned discontinued
operations debt represents debt of the Company and is expected to be paid
with the liquidation of the remaining asset portfolio of the discontinued
operations. The $219 million of interest expense in 1995 was an increase of
$17 million from the 1994 interest expense of $202 million. The 1995
increase is principally attributable to the assignment to continuing
operations, beginning in 1995, of interest expense previously assigned to
discontinued operations, and higher interest expense resulting from the
timing of settlements of intercompany liabilities.
Since substantially all of the Company's contracts receivable earn
fixed rates of interest, the Company "match funds" the contracts by swapping
variable-rate commercial paper and medium term notes into fixed rates of
interest for specified maturities. This practice is employed because it
effectively "locks in" a spread and eliminates the risk of shrinking interest
margins in a rising interest rate environment. Conversely, this practice
effectively eliminates the opportunity to increase margins when interest
rates are declining. The Company intends to continue to match its contracts
receivable and indebtedness to ensure an adequate spread between interest
income and interest expense.
Operating and administrative expenses was $13 million in 1996 compared
to $14 million and $13 million in 1995 and 1994, respectively. These expenses
are primarily the costs to administer the contracts receivable purchased from
Xerox.
The effective income tax rate for 1996 was 40.7 percent as compared
with 40.3 percent and 40.8 percent for 1995 and 1994, respectively.
Discontinued Operations
Since their discontinuance in 1990, the Company has made substantial
progress in disengaging from the real estate and third-party financing
businesses. Through December 31, 1996, the Company has received net cash
proceeds of $2,476 million from the sale of discontinued business units,
asset securitizations, sales, and runoff collection activities. The amounts
received have been consistent with the Company's estimates in its disposal
plan and were primarily used to reduce the Company's short-term indebtedness.
During 1996, the Company reduced its net assets of discontinued
operations by $31 million, primarily through contractual maturities and cash
sales. During 1995, the Company reduced its net assets of discontinued
operations by approximately $106 million, primarily through the disposal of
the Company's $74 million investment in Xerox Financial Services Life
Insurance Company ("XFSLIC") and through contractual maturities.
Since a significant portion of the remaining $152 million portfolio
represents passive lease receivables, some with long-duration contractual
maturities and unique tax attributes, the Company expects that the wind-down
of the portfolio will continue to be a gradual process. The Company believes
that the liquidation of the remaining assets will not result in a net loss.
Additional information regarding discontinued operations is included in
Note 2 to the Consolidated Financial Statements.
(4)
<PAGE>
Capital Resources and Liquidity
The Company's principal sources of funds are cash from the collection
of Xerox contracts receivable and borrowings.
Net cash provided by operating activities was $123 million in 1996
compared with $17 million in 1995 and $20 million in 1994. The 1996 increase
is primarily due to significantly increased intercompany receipts in 1996
over 1995 and 1994.
Net cash used in investing activities was $122 million in 1996 compared
to $210 million provided in 1995. The change is principally the result of
significantly more contracts receivable purchased in 1996 than in 1995,
particularly in the fourth quarter. The increase is the direct result of
Xerox' investments in sales coverage and marketing support and excellent
customer acceptance of Xerox' new digital products. Net cash provided in
1995 was $163 more than the $47 million provided in 1994 due to a realignment
of Xerox' United States Customer Operations sales force.
Net cash used in financing activities was $1 million in 1996 compared
to $227 million in 1995. The decrease is associated with the increased
purchases of contracts in 1996 over 1995. The increased purchases resulted
in more of the collections on existing contracts being used to purchase new
contracts in 1996 than in 1995. Conversely, less of the collections was used
to reduce debt in 1996 than in 1995. Net cash used in financing activities
was $227 million in 1995 compared to $68 million in 1994. This change is
largely due to lower borrowing proceeds due to a reduced level of investments
in Xerox' contracts receivable.
Cash dividends paid during the three years ended December 31 were as
follows (in millions): 1996 - $97; 1995 - $75; and 1994 - $88. In addition,
there was a non-cash dividend in 1995 of $74 million.
At December 31, 1996, the Company had domestic shelf capacity of $450
million. In addition, a $2 billion Euro-debt facility is available to both
Xerox and the Company of which $1.397 billion remained unused at December 31,
1996. In 1997, the Company intends to file for a new domestic shelf in the
amount of $1 billion to further enhance capital markets flexibility.
At December 31, 1996, the Company and Xerox have joint access to a $5
billion revolving credit agreement with various banks which expires in 2000.
Any amounts borrowed under this facility would be at rates based, at the
borrower's option, on spreads above certain reference rates such as LIBOR and
Federal Funds.
The Company believes that cash provided by continuing operations, cash
available under its commercial paper program supported by its credit
facility, and its readily available access to the capital markets are more
than sufficient for its funding needs. New borrowing associated with the
financing of customer purchases of Xerox equipment will continue in 1997 and
decisions regarding the size and timing of any new term debt financing will
be made based on cash flows, match funding needs, refinancing requirements
and capital market conditions.
The Company intends to continue to match fund its contracts receivable.
To assist in managing its interest rate exposure, the Company has entered
into a number of interest rate swap agreements. In general, the Company's
objective is to hedge its variable-rate debt by paying fixed rates under the
swap agreements while receiving variable-rate payments in return.
Additionally, in order to match the duration of its assets, the Company
opportunistically issues variable- and fixed-rate medium term notes which are
swapped to attractive commercial paper or LIBOR based rates.
(5)
<PAGE>
During 1996, the Company entered into interest rate swap agreements
which effectively converted $1,107 million of variable-rate debt into fixed-
rate debt. These agreements mature at various dates through 2001 and
resulted in a weighted average fixed-rate of interest of 6.07 percent. The
Company also entered into interest rate swap agreements during 1996 which
effectively converted $700 million of fixed rate debt into variable-rate debt
indexed to commercial paper or LIBOR rates. Of the $700 million, $500
million mature at various dates through 2001 and $200 million mature in 2011.
Of the agreements maturing in 2011, all are cancelable by the respective
counterparties on interest payment dates beginning in 1998. These
arrangements were entered into to ensure that, when taking into account the
Company's debt portfolio described in Footnote 5 to the Consolidated
Financial Statements, the Company is adequately match funded.
As of December 31, 1996, the Company's overall debt-to-equity ratio was
7.0 to 1. The Company's practice is to maintain a debt-to-equity ratio of
approximately 7.0 to 1. Prior to December 31, 1996, the Company's practice
was to maintain a debt-to-equity ratio of approximately 6.5 to 1. This
change reflects, in part, the Company's significant progress toward full
disengagement from real estate and third-party financing businesses.
Pursuant to a Support Agreement between the Company and Xerox, Xerox
has agreed to retain ownership of 100 percent of the voting capital stock of
the Company and to make periodic payments to the extent necessary to ensure
that the Company's annual pre-tax earnings available for fixed charges equal
at least 1.25 times the Company's fixed charges.
(6)
<PAGE>
ITEM 8. Financial Statements and Supplementary Data
The financial statements of the Company and its consolidated
subsidiaries and the notes thereto, the financial statement schedule, and the
report thereon of KPMG Peat Marwick LLP, independent auditors, are set forth
on pages 9 through 25 hereof.
The financial statement and schedule required herein is filed as
"Financial Statement Schedules" pursuant to Item 14 of this report on Form
10-K.
ITEM 9. Disagreements on Accounting and Financial Disclosure
Not Applicable.
ITEM 10. Directors and Executive Officers of the Registrant
Not Required.
ITEM 11. Executive Compensation
Not Required.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
Not Required.
ITEM 13. Certain Relationships and Related Transactions
Not Required.
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) (1) and (2) The financial statements and the Item 8 financial
statement schedule and the report of independent auditors thereon
filed herewith are set forth in the Index to Financial Statements
and Schedule included herein.
(3) The exhibits filed herewith are set forth in the Exhibit
Index included herein.
(b) No Current Reports on Form 8-K were filed during the last quarter
of the period covered by this Report.
(7)
<PAGE>
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
XEROX CREDIT CORPORATION
BY________ __ _______________
(NAME AND TITLE) George R. Roth, Vice President,
Treasurer and Chief Financial Officer
March 27, 1997
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.
March 27, 1997
Signature Title
Principal Executive Officer:
Eunice M. Filter _____ ______ __ _________________
President, Chief Executive Officer
and Director
Principal Financial Officer:
George R. Roth _____ ______ __ _________________
Vice President, Treasurer and
Chief Financial Officer
Principal Accounting Officer:
Daniel S. Marchibroda _____ ______ __ _________________
Controller
Directors:
_____ _________ ________________
Donald R. Altieri, Director
_____ _____ __ _________________
David R. McLellan, Director
_____ _____ __ _________________
Barry D. Romeril, Director
_____ ______ __ ________________
Stuart B. Ross, Director
(8)
<PAGE>
Report of Independent Auditors
The Board of Directors
Xerox Credit Corporation:
We have audited the consolidated financial statements of Xerox Credit
Corporation and subsidiaries as listed in the accompanying index. In
connection with our audits of the consolidated financial statements, we also
have audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and the financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Xerox
Credit Corporation and subsidiaries at December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
January 23, 1997
(9)
<PAGE>
XEROX CREDIT CORPORATION
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
Financial Statements:
Consolidated statements of income for each of the years in the three-year
period ended December 31, 1996
Consolidated balance sheets at December 31, 1996 and 1995
Consolidated statements of shareholder's equity for each of the years in the
three-year period ended December 31, 1996
Consolidated statements of cash flows for each of the years in the three-year
period ended December 31, 1996
Notes to consolidated financial statements
Report of Independent Auditors
Schedule:
II Valuation and qualifying accounts
All other schedules are omitted as they are not applicable or the information
required is included in the consolidated financial statements or notes
thereto.
(10)
<PAGE>
XEROX CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1996, 1995 and 1994
(In Millions)
1996 1995 1994
Earned Income:
Contracts receivable $ 340 $ 352 $ 362
Expenses:
Interest 204 219 202
Operating and administrative 13 14 13
Total expenses 217 233 215
Income before income taxes 123 119 147
Provision for income taxes 50 48 60
Net income $ 73 $ 71 $ 87
The accompanying notes are an integral part of the consolidated financial
statements.
(11)
<PAGE>
XEROX CREDIT CORPORATION
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
(In Millions)
ASSETS
1996 1995
Cash and cash equivalents $ - $ -
Investments:
Contracts receivable 4,272 4,084
Notes receivable - Xerox and affiliates 130 189
Unearned income (534) (495)
Allowance for losses (123) (127)
Total investments 3,745 3,651
Net assets of discontinued operations 152 183
Deferred Income Taxes and Other assets 2 3
Total assets $ 3,899 $ 3,837
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Notes payable within one year:
Commercial paper $ 1,126 $ 875
Current portion of notes payable after one year 886 868
Note payable to Xerox and affiliates 20 -
Notes payable after one year 1,238 1,411
Notes payable after one year - Xerox and affiliates 75 75
Due to Xerox Corporation, net 16 52
Accounts payable and accrued liabilities 31 56
Deferred income taxes 31 -
Total liabilities 3,423 3,337
Shareholder's Equity:
Common stock, no par value, 2,000 shares
authorized, issued, and outstanding 23 23
Additional paid-in capital 219 219
Retained earnings 234 258
Total shareholder's equity 476 500
Total liabilities and shareholder's equity $ 3,899 $ 3,837
The accompanying notes are an integral part of the consolidated financial
statements.
(12)
<PAGE>
XEROX CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
Years Ended December 31, 1996, 1995 and 1994
(In Millions)
Additional Cumulative
Common Paid-In Retained Translation
Stock Capital Earnings Adjustment Total
Balance at December 31, 1993 $ 23 $ 145 $ 337 $ 1 $ 506
Net Income 87 87
Dividends (88) (88)
Balance at December 31, 1994 $ 23 $ 145 $ 336 $ 1 $ 505
Net Income 71 71
Dividends* (149) (149)
Capital Contribution 74 74
Other (1) (1)
Balance at December 31, 1995 $ 23 $ 219 $ 258 $ - $ 500
Net Income 73 73
Dividends (97) (97)
Balance at December 31, 1996 $ 23 $ 219 $ 234 $ - $ 476
* Includes a non-cash dividend of $74 million.
The accompanying notes are an integral part of the consolidated financial
statements.
(13)
<PAGE>
XEROX CREDIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1996, 1995 and 1994
(In Millions)
1996 1995 1994
Cash Flows from Operating Activities
Net income $ 73 $ 71 $ 87
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Net change in operating assets and liabilities 50 (54) (67)
Net cash provided by operating activities 123 17 20
Cash Flows from Investing Activities
Purchases of investments (1,922) (1,539) (1,735)
Proceeds from investments 1,769 1,717 1,653
Net collections from discontinued operations 31 32 129
Net cash (used in) provided by investing activities (122) 210 47
Cash Flows from Financing Activities
Change in commercial paper, net 251 (782) 4
Proceeds from long-term debt 700 1,033 567
Principal payments of long-term debt (855) (403) (551)
Dividends (97) (75) (88)
Net cash used in financing activities (1) (227) (68)
Decrease in cash and cash equivalents - - (1)
Cash and cash equivalents, beginning of year - - 1
Cash and cash equivalents, end of year $ - $ - $ -
Supplemental disclosure of non-cash activities:
As Described in Note 2, the Company dividended its $74 million investment
in Xerox Financial Services Life Insurance Company to its parent company
in 1995. The parent company then made a capital contribution of $74
million by issuing a $74 million interest bearing note to the Company.
The accompanying notes are an integral part of the consolidated financial
statements.
(14)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of Xerox
Credit Corporation (the Company) and its subsidiaries. The Company is a
wholly-owned subsidiary of Xerox Financial Services, Inc. (XFSI), which is in
turn wholly-owned by Xerox Corporation (Xerox). All significant transactions
between the Company and its subsidiaries have been eliminated.
Recognition of Earned Income
The Company utilizes the interest method for the recognition of earned
income associated with contracts receivable. Under this method, the
difference between the amount of gross contract receivable and the cost of
the contract is recorded as unearned income. The unearned income is
amortized to income over the term of the transaction under an effective yield
method.
Cash and Cash Equivalents
All highly liquid investments of the Company, with a maturity of three
months or less at date of purchase, are considered to be cash equivalents.
Allowance for Losses
In connection with the contracts receivable purchased from Xerox, the
Company retains an allowance for losses at the time of purchase which is
intended to protect against future losses. Should any additional allowances
be required, Xerox is required to provide such funding. The resultant effect
is to relieve the Company of any exposure with regard to write-offs
associated with the contracts receivable purchased from Xerox.
Xerox computes the allowance for potential losses on all contracts based
upon historical experience and current trends. When the Company purchases
the contracts from Xerox, the portion of Xerox' allowance allocable to the
purchased contracts is deducted from the purchase price and recorded as
Allowance for Potential Losses by the Company. If more contracts are charged
off than were forecast in the initial reserve calculation, Xerox reimburses
the Company for the excess chargeoffs.
Charge Off of Delinquent Receivables
The Company's policy with respect to the charge-off of delinquent
receivables is that receivables are charged off as soon as it becomes
apparent that the collection of the receivables through normal means is
unlikely. The policy, enforced by Xerox on behalf of the Company,
contemplates that delinquent receivables will be charged off before the aging
of such delinquent receivables reaches 180 days.
Fair Value of Financial Instruments
Under SFAS No. 107 - "Disclosures about Fair Value of Financial
Instruments," the Company is required to disclose the fair value of financial
instruments. The fair value of cash and commercial paper approximate
carrying amounts due to the short maturities of these instruments. The fair
value of investments, interest rate swaps, and notes payable are discussed in
Notes 3, 4, and 5, respectively.
(15)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Reclassifications
Certain prior year balances have been reclassified to conform with the
current year presentation.
(2) Discontinued Operations
In 1990 the Company discontinued its third party financing and real
estate operations. The Company's disposal plan included the sale of three
standalone subsidiary companies (Circle Business Credit, Inc.; LMV Leasing
Inc.; and Highline Financial Services Inc.) which were sold during 1991. The
remaining assets primarily consisted of lease and other interest bearing
receivables. The disposal plan contemplated the recovery of these assets
primarily in the course of normal maturities. This continues to be the
Company's strategy. Since the time of discontinuance the Company has not
originated any new financing or real estate business and its management
activities have been almost exclusively dedicated to liquidation of the
assets. In accordance with APB No. 30, all material related items of income
and loss have previously been estimated and recorded and no longer affect the
reported results of operations.
Through December 31, 1996, the Company received net cash proceeds of
$2,476 million from the sale of discontinued business units, asset
securitizations, sales, and runoff collection activities. Of the $2,476
million, $31 million, $32 million and $129 million was received in 1996, 1995
and 1994, respectively. The amounts received have been consistent with the
Company's estimates in the disposal plan and were primarily used to reduce
the Company's short-term indebtedness.
Approximately $46 million (30 percent) of the remaining assets
represent passive lease receivables, some with long-duration contractual
maturities and unique tax attributes. Accordingly, the Company expects that
the wind-down of the portfolio will continue to be a gradual process. The
Company believes that the liquidation of the remaining assets will not result
in a net loss.
Short-and long-term debt represents debt included in the Company's
consolidated balance sheets that has been assigned to the discontinued
businesses in accordance with historical methodologies. The Company has
consistently assigned debt to discontinued operations based on the net assets
of discontinued operations and debt to equity ratios that existed at the time
the assets were acquired. This assigned debt is expected to be paid with the
liquidation of the remaining asset portfolio of the discontinued operations.
Beginning in 1995, the amount of interest expense that would have been
allocated to discontinued operations is insignificant and therefore is now
reported within continuing operations.
In June 1995, the Company's parent, Xerox Financial Services,
Inc.(XFSI), sold Xerox Financial Services Life Insurance Company (XFSLIC).
In connection with the sale, the Company's $74 million investment in XFSLIC,
reported as a component of net assets of discontinued operations at the time
of the sale, was dividended to XFSI. XFSI in turn made a capital
contribution of $74 million to the Company by issuing a $74 million interest-
bearing note to the Company. This note is an asset of the Company's
continuing operations.
(16)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Summarized information of discontinued operations for the three years ended
December 31, 1996 follows:
(In millions)
1996 1995 1994
Balance Sheet Data
Gross finance receivables $ 65 $ 76 $ 109
Unearned income (23) (25) (31)
Other assets 110 132 211*
Investment in discontinued operations, net $ 152 $ 183 $ 289
Assigned short- and long-term debt $ 81 $ 98 $ 154
* Includes a $74 million investment in Xerox Financial Services Life
Insurance Company, a subsidiary of the Company's parent, Xerox Financial
Services, Inc.
Contractual maturities of the gross finance receivables at December 31,1996
follow (in millions):
1997 $ 18
1998 2
1999 2
2000 6
2001 -
2002 and thereafter 37
Total $ 65
(17)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(3) Investments
Contracts receivable represent purchases of long-term trade accounts
receivable from Xerox. These receivables arise from Xerox equipment being
sold under installment sales and sales-type leases. Contract terms on these
receivables range primarily from two to five years and are generally
collateralized by a security interest in the underlying assets. The Company
purchased receivables from Xerox totaling $1,922 million in 1996, $1,539
million in 1995, and $1,735 million in 1994. The Company was charged $11
million in 1996, $10 million in 1995 and $11 million in 1994 by Xerox for
administrative costs associated with the contracts receivable purchased.
Under SFAS No. 107 - "Disclosures about Fair Values of Financial
Instruments," the Company is not required to determine the fair value of
these receivables. Management believes that as of December 31, 1996 any
revaluation of the contracts receivable would result in a fair value in
excess of the carrying value of these receivables.
The scheduled maturities of contracts receivable at December 31, 1996
are as follows (in millions):
1997 $1,705
1998 1,185
1999 792
2000 409
2001 172
Thereafter 9
Total $4,272
Experience has shown that a portion of these contracts receivable will be
prepaid prior to maturity. Accordingly, the preceding schedule of
contractual maturities should not be considered a forecast of future cash
collections.
Included in the $130 million notes receivable balance from Xerox and
affiliates are receivables from related parties payable on demand at various
floating interest rates.
(18)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(4) Lines of Credit and Interest Rate Swaps
At December 31, 1996, the Company and Xerox had joint access to a $5.0
billion revolving credit agreement with various banks, which expires December
14, 2000. This agreement is unused and is available to back the issuance of
commercial paper. At December 31, 1996, the Company had a total of $1,126
million of commercial paper outstanding. The average interest rate on
commercial paper outstanding at December 31, 1996 is 5.8 percent.
The Company routinely enters into interest rate swap agreements in the
management of interest rate exposure. An interest rate swap is an agreement
to exchange interest rate payment streams based on a notional principal
amount. In general, the Company's objective is to hedge its variable-rate
debt by paying fixed rates under the swap agreements and receiving commercial
paper-rate payments in return. These swap agreements effectively convert an
amount (equal to the notional amount) of underlying variable-rate commercial
paper into fixed-rate debt. The net interest rate differentials that will be
paid or received are recorded currently as adjustments to interest expense.
The counterparties to these swap agreements are typically major commercial
banks.
The Company does not enter into swap transactions for trading or other
speculative purposes. The Company's policies on the use of such derivative
instruments prescribe an investment grade counterparty credit floor and at
least quarterly monitoring of market risk on a counterparty-by-counterparty
basis. Based upon its ongoing evaluation of the replacement cost of its
derivatives transactions and counterparty creditworthiness, the Company
considers the risk of credit default significantly affecting its financial
position or results of operations to be remote. The Company's interest rate
hedging activities are largely unaffected by changes in market conditions as
swaps are typically held to maturity in order to lock in interest spreads on
underlying transactions.
The aggregate notional amounts of interest rate swaps outstanding at
December 31, 1996 and 1995 are as follows:
(Dollars in millions)
1996 1995
Pay fixed/receive variable $2,666 $2,278
Pay variable/receive variable 828 978
Pay variable/receive fixed 800 280
$4,294 $3,536
Average interest payment rates 5.99% 5.97%
These arrangements were entered into to ensure that, when taking into account
the Company's debt portfolio described in Footnote 5, the Company is
adequately match funded.
At December 31, 1996 and 1995, the Company's swap agreements had
aggregate net fair values of $(8) million and $(15) million, respectively.
These values represent the estimated net amounts the Company would have paid
if the agreements had been terminated as of December 31, 1996 and 1995,
respectively. The fair values for interest rate swap agreements were
calculated by the Company based on market conditions at year-end and
supplemented with quotes from brokers. The Company has no present plans to
terminate any of these agreements prior to their scheduled maturities.
(19)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The maturities of the Company's swaps outstanding as of December 31,
1996 are: 1997 - $1,210 million, 1998 - $680 million, 1999 - $200 million,
2000 - $877, 2001 and thereafter - $1,327 million.
(5) Notes Payable
A summary of notes payable at December 31, 1996 and 1995 follows:
(In Millions)
1996 1995
6.25% Notes due 1996 $ - $ 200
Medium Term Notes due 1996 - 100
Floating Rate Notes due 1996 (a) - 350
Medium Term Notes due 1997 (b,c) 347 147
Floating Rate Notes due 1997 (a) 530 530
Medium Term Notes due 1998 (b) 100 100
Floating Rate Notes due 1998 (a) 320 120
10.00% Notes due 1999 150 150
10.125% Notes due 1999 (d) - 150
6.50% Euro Medium Term Notes due 1999 150 -
Floating Rate Notes due 2000 (c,e) 153 353
Medium Term Notes due 2001 (b) 100 -
Medium Term Notes due 2011 (b,f) 200 -
Floating Rate Notes due 2048 (g) 61 61
Other Notes due 1996, 1997 and 2000 __ 13 __ 18
Subtotal $2,124 $2,279
Less current maturities (886) (868)
Total Notes Payable After one Year $1,238 $1,411
(a) The notes carry interest rates which are based primarily on spreads
above certain reference rates such as U.S. Treasury Bill, LIBOR and
Federal Funds Rates.
(b) Medium Term Notes due in 1997, 1998, 1999, and 2000+ have weighted
average interest rates of 8.05%, 7.13%, 6.50% and 7.05%, respectively.
(c) $150 million of Medium Term Notes due 2000 are expected to be called in
1997 and are therefore presented as payable in 1997 rather than 2000.
(d) The notes were redeemed on April 15, 1996, at their principal amount
plus accrued interest.
(e) $50 million of Floating Rate Notes due 2000 were redeemed in the first
quarter of 1996 at their principal amount plus accrued interest.
(f) $200 million of Medium Term Notes due 2011 are first callable in 1998.
(g) The notes mature August 15, 2048 and are repayable annually each August
15th at the option of the noteholders. The outstanding notes are
classified as notes payable after one year, since the Company has the
ability to refinance them on a long-term basis, if required. The
interest rate is indexed to rates on commercial paper placed for
issuers whose commercial paper rating is "AA" or the equivalent as
reported in Federal Reserve Statistical Release H.15 (519), which at
year-end was 5.95 percent.
(20)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Principal payments on notes payable for the next five years are (in
millions):
1997 $ 886
1998 720
1999 400
2000 53
2001 and Thereafter 65
Total $ 2,124
Certain of the Company's debt agreements allow it to redeem outstanding debt,
usually at par, prior to scheduled maturity. Outstanding debt issues with
such call features are classified on the balance sheet and in the preceding
five-year maturity summary in accordance with management's current
expectations. The actual decision as to early redemption will be made at the
time the early redemption option becomes exercisable and will be based on
economic and business conditions at that time.
Interest payments on notes payable for 1996, 1995 and 1994 were $146
million, $142 million, and $137 million, respectively. Interest payments on
commercial paper for 1996, 1995 and 1994 were $68 million, $79 million and
$66 million, respectively. The weighted-average commercial paper interest
rates for 1996, 1995 and 1994 were 5.5 percent, 5.9 percent and 4.4 percent,
respectively.
At December 31, 1996 and 1995, carrying values of notes payable were
$2,124 million and $2,279 million, respectively. The fair values of the
Company's notes payable at December 31, 1996 and 1995 were $2,140 million and
$2,309 million, respectively, based on quoted market prices for the notes or
other issues with similar features and maturity dates. The difference
between the fair value and the carrying value represents the theoretical net
amounts the Company would have paid or received if it had retired all notes
payable at December 31, 1996 or 1995, respectively. The Company has no plans
to retire its notes payable prior to their call or final maturity dates.
The original issue discount and other expenses associated with the debt
offerings are amortized over the term of the related issue.
(21)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(6) Income Taxes
Income taxes are provided at statutory rates based on income before
income taxes exclusive of the amortization of investment tax credits and
earnings not subject to Federal taxation. Substantially all of the Company's
operations are included in Xerox' consolidated income tax returns. In
connection with these consolidated returns, the Company paid Xerox $69
million, $48 million, and $86 million in 1996, 1995 and 1994, respectively.
The Company paid less than $1 million in 1996 to taxing authorities for
Company operations, and received a net of $3 million in 1995 and paid net $10
million in 1994, to taxing authorities for Company operations not included in
Xerox' consolidated tax returns.
The components of income from continuing operations before taxes and the
provision for income taxes are as follows:
(In Millions)
1996 1995 1994
Income from continuing operations
before income taxes: $ 123 $ 119 $ 147
Federal income taxes
Current $ 43 $ 42 $ 52
Deferred - - -
State income taxes
Current 7 6 8
Deferred - - -
Total provision for income taxes $ 50 $ 48 $ 60
A reconciliation of the effective tax rate from the U.S. Federal
statutory tax rate follows:
1996 1995 1994
U.S. Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of Federal
income tax benefit 5.7 5.3 5.8
Effective tax rate 40.7% 40.3% 40.8%
(22)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The tax effects of temporary differences that give rise to significant
portions of deferred taxes at December 31, 1996 follows:
(In millions)
1996 1995
Tax effect of future tax deductions:
Discontinued real-estate tax benefit
and other $ 3 $ 36
Tax effect on future taxable income:
Discontinued leverage leases and other (34) (35)
Total deferred taxes, net $ (31) $ 1
The Company believes it is more likely than not that the deferred tax
assets will be realized in the ordinary course of operations based on
scheduling of deferred tax liabilities and income from operating activities.
(7) Xerox Corporation Support Agreement
The terms of a Support Agreement with Xerox provide that the Company
will receive income maintenance payments, to the extent necessary, so that
the Company's earnings shall not be less than 1.25 times its fixed charges.
For purposes of this calculation, both earnings and fixed charges are as
defined in Section 1404 (formerly Section 81(2)) of the New York Insurance
Law. In addition, the agreement requires that Xerox retain 100 percent
ownership of the Company's voting capital stock.
(23)
<PAGE>
XEROX CREDIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(8) Quarterly Results of Operations (Unaudited)
A summary of interim financial information follows:
(In Millions)
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
1996
Earned income $ 88 $ 85 $ 83 $ 84 $ 340
Interest expense 52 51 49 52 204
Operating and administrative
expenses 4 3 3 3 13
Income before Income Taxes 32 31 31 29 123
Income taxes 13 13 13 11 50
Net income $ 19 $ 18 $ 18 $ 18 $ 73
1995
Earned income $ 92 $ 88 $ 87 $ 85 $ 352
Interest expense 53 55 57 54 219
Operating and administrative
expenses 3 4 3 4 14
Income before Income Taxes 36 29 27 27 119
Income taxes 15 11 11 11 48
Net income $ 21 $ 18 $ 16 $ 16 $ 71
(24)
<PAGE>
SCHEDULE II
XEROX CREDIT CORPORATION
Valuation and Qualifying Accounts
Years Ended December 31, 1996, 1995 and 1994
(In Millions)
Additions
Balance Charged Retained Balance
at to at at
Beginning Costs Time End
of and of of
Period Expenses Purchase Deductions Period
(A) (B)
1996
Allowance for losses-
continuing operations $ 127 $ - $ 75 $ 79 $ 123
1995
Allowance for losses-
continuing operations $ 129 $ - $ 49 $ 51 $ 127
1994
Allowance for losses-
continuing operations $ 153 $ - $ 19 $ 43 $ 129
(A) In connection with the contracts receivable purchased from Xerox,
the Company retains an allowance for losses at the time of purchase
which is intended to protect against future losses. Should any
additional allowances be required, Xerox is required under the
Operating Agreement to provide such funding. For the period
covered by this Schedule, no additional funding was required or
provided.
(B) Amounts written-off, net of recoveries.
(25)
<PAGE>
XEROX CREDIT CORPORATION
Form 10-K
For the Year Ended December 31, 1996
Index of Exhibits
Document
(3) (a) Certificate of Incorporation of Registrant filed with the
Secretary of State of Delaware on June 23, 1980.
Incorporated by reference to Exhibit 3(a) to Registration
Statement No. 2-71503.
(b) By-Laws of Registrant, as amended through July 15, 1991.
Incorporated by reference to Exhibit 3(b) to Registrants
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1991.
(4) (a) Indenture dated as of March 1, 1988 between Registrant and
The First National Bank of Chicago relating to unlimited amounts
of debt securities which may be issued from time to time by
Registrant when and as authorized by Registrant's Board of
Directors or the Executive Committee of the Board of Directors,
as supplemented by the First Supplemental Indenture dated as of
July 1, 1988.
Incorporated by reference to Exhibit 4(a) to Registration
Statement No. 33-20640 and to Exhibit 4(a)(2) to Registrant's
Current Report on Form 8-K dated July 13, 1988.
(b) Indenture dated as of March 1, 1989 between Registrant and
Citibank, N.A. relating to unlimited amounts of debt securities
which may be issued from time to time by Registrant when and as
authorized by Registrant's Board of Directors or the
Executive Committee of the Board of Directors, as supplemented by
the First Supplemental Indenture dated as of October 1, 1989.
Incorporated by reference to Exhibit 4(a) to Registration
Statement No. 33-27525 and to Exhibit 4(a)(2) to Registration
Statement No. 33-31367.
(c) Indenture dated as of October 1, 1991 between Registrant and
Citibank, N.A. relating to unlimited amounts of debt securities
which may be issued from time to time by Registrant when and as
authorized by the Registrant's Board of Directors or the
Executive Committee of the Board of Directors, as supplemented
by the First Supplemental Indenture dated as of May 1, 1992.
Incorporated by reference to Exhibit 4(a)(1) and 4(a)(2) to
Registration Statement No. 33-43470.
(d) Indenture dated as of May 1, 1994, between Registrant and State
Street Bank and Trust Company (formerly The First
National Bank of Boston) relating to unlimited amounts of debt
securities which may be issued from time to time by Registrant
when and as authorized by Registrant's Board of Directors or
Executive Committee of the Board of Directors.
Incorporated by reference to Exhibit 4 (a) to Registrant's
Registration Statement No. 33-53533 and to Exhibits 4 (a)(1)
and 4 (a)(2) to Registrant's Registration Statement No. 33-43470.
(26)
<PAGE>
XEROX CREDIT CORPORATION
Form 10-K
For the Year Ended December 31, 1996
Index of Exhibits (continued)
Document
(e) Indenture dated as of October 2, 1995 between Registrant and State
Street Bank and Trust Company relating to unlimited amounts of
debt securities which may be issued from time to time by
Registrant when and as authorized by Registrant's Board of
Directors.
Incorporated by reference to Exhibit 4(a) to Registrant's
Registration Statement No. 33-61481.
(f) Instruments with respect to long-term debt where the total amount
of securities authorized thereunder does not exceed ten percent
of the total assets of Registrant and its subsidiaries on a
consolidated basis have not been filed. Registrant agrees to
furnish the Commission a copy of each such instrument upon
request.
(10) (a) Amended and Restated Operating Agreement originally made and
entered into as of November 1, 1980, amended and restated as of
December 31, 1992 between Registrant and Xerox .
Incorporated by reference to Exhibit 10(a) of Registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.
(b) Support Agreement dated as of November 1, 1980 between
Registrant and Xerox.
Incorporated by reference to Exhibit 10(b) to Registration
Statement No. 2-71503.
(c) Tax Allocation Agreement dated as of January 1, 1981 between
Registrant and Xerox.
Incorporated by reference to Exhibit 10(c) to Registration
Statement No. 2-71503.
(12) (a) Computation of Registrant's Ratio of Earnings to Fixed Charges.
See Page 28 of this Report on Form 10-K.
(b) Computation of Xerox' Ratio of Earnings to Fixed Charges.
See Page 29 of this Report on Form 10-K.
(23) Consent of KPMG Peat Marwick LLP.
See Page 30 of this Report on Form 10-K.
(27) Financial Data Schedule (Electronic Form Only)
(27)
<PAGE>
Exhibit 12(a)
XEROX CREDIT CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions)
Year Ended December 31,
1996 1995 1994 1993 1992
Income before income taxes $ 123 $ 119 $ 147 $ 154 $ 158
Fixed charges:
Interest expense (2)
Xerox debt 5 6 5 4 2
Other debt 199 213 197 205 210
Total fixed charges 204 219 202 209 212
Earnings available for
fixed charges $ 327 $ 338 $ 349 $ 363 $ 370
Ratio of earnings to
fixed charges (1) 1.60 1.54 1.73 1.74 1.75
(1) The ratio of earnings to fixed charges has been computed based on the
Company's continuing operations by dividing total earnings available for
fixed charges by total fixed charges.
(2) Debt has been assigned to discontinued operations based on the net
assets of discontinued operations and the debt to equity ratios that
existed at the time the assets were acquired. Beginning in 1995, the
amount of interest expense that would have been allocated to
discontinued operations is insignificant and is now being
reported within continuing operations and therefore included in the
fixed charges. Discontinued operations consist of the Company's real
estate development and related financing operations and its third-party
financing and leasing businesses.
(28)
<PAGE>
Exhibit 12(b)
XEROX CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Millions)
Year Ended December 31,
1996 1995 1994 1993* 1992
Fixed charges:
Interest expense $ 592 $ 603 $ 520 $ 540 $ 627
Rental expense 140 142 170 180 187
Total fixed charges before
capitalized interest 732 745 690 720 814
Capitalized interest - 2 5 17
Total fixed charges $ 732 $ 745 $ 692 $ 725 $ 831
Earnings available for fixed
charges:
Earnings** $ 2,067 $ 1,980 $ 1,602 $ (193) $ 1,183
Less undistributed
income in minority
owned companies (84) (90) (54) (51) (52)
Add fixed charges before
capitalized interest 732 745 690 720 814
Total earnings available
for fixed charges $ 2,715 $ 2,635 $ 2,238 $ 476 $ 1,945
Ratio of earnings to
fixed charges (1)(2) 3.71 3.54 3.23 0.66 2.34
(1) The ratio of earnings to fixed charges has been computed based on
Xerox' continuing operations by dividing total earnings available for
fixed charges, excluding capitalized interest, by total fixed charges.
Fixed charges consist of interest, including capitalized interest, and
one-third of rent expense as representative of the interest portion of
rentals. Debt has been assigned to discontinued operations based on
historical levels assigned to the businesses when they were continuing
operations, adjusted for subsequent paydowns. Discontinued
operations consist of Xerox' Insurance and Other Financial Services
businesses and its real-estate development and third-party financing
businesses.
(2) Xerox' ratio of earnings to fixed charges includes the effect of
Xerox' finance subsidiaries, which primarily finance Xerox equipment.
Financing businesses are more highly leveraged and, therefore, tend to
operate at lower earnings to fixed charges ratio levels than do non-
financial businesses.
* 1993 earnings were inadequate to cover fixed charges. The coverage
deficiency was $249 million.
** Sum of "Income (Loss) before Income Taxes, Equity Income and Minorities'
Interests" and "Equity in Net Income of Unconsolidated Affiliates."
(29)
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Xerox Credit Corporation
We consent to incorporation by reference in the Registration Statements
(No. 33-43470 and No. 33-61481) on Form S-3 of Xerox Credit
Corporation of our report dated January 23, 1997, relating to the
consolidated balance sheets of Xerox Credit Corporation and consolidated
subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of income, shareholder's equity and cash flows and related
financial statement schedule for each of the years in the three-year period
ended December 31, 1996 which report appears in the December 31, 1996 Annual
Report on Form 10-K of Xerox Credit Corporation.
KPMG PEAT MARWICK LLP
Stamford, Connecticut
March 27, 1997
(30)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
XEROX CREDIT CORPORATION'S DECEMBER 31, 1996, FINANCIAL STATEMENTS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 3868
<ALLOWANCES> 123
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3899
<CURRENT-LIABILITIES> 0
<BONDS> 3345
<COMMON> 23
0
0
<OTHER-SE> 453
<TOTAL-LIABILITY-AND-EQUITY> 3899
<SALES> 0
<TOTAL-REVENUES> 340
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 13
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 204
<INCOME-PRETAX> 123
<INCOME-TAX> 50
<INCOME-CONTINUING> 73
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
