EX-12 3 dex12.htm COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
 
Exhibit 12
 
Xerox Corporation
Computation of Ratio of Earnings to Fixed Charges
 
The ratio of earnings to fixed charges, the ratio of combined earnings to 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, adjustment for minorities’ interests and equity income or loss, (b) fixed charges, as defined below, (c) amortization of capitalized interest and (d) distributed equity income. From this total, we subtract (a) capitalized interest and (b) preferred security dividend requirements of our consolidated subsidiaries and any accretion in the carrying value of the redeemable preferred securities of our consolidated subsidiaries.
 
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, (c) that portion of rental expense that is representative of the interest factor and (d) the amount of pre- tax earnings required to cover preferred security dividends and any accretion in the carrying value in the redeemable preferred securities of our consolidated subsidiaries. Note, in our calculation, all of the dividends and related carrying value accretion of the preferred securities of our consolidated subsidiaries are tax deductible, which are those referenced in Note 17 to the consolidated financial statements included in our 2001 Annual Report under the caption, “Company-Obligated, Mandatorily Redeemable Preferred Securities of Subsidiary Trusts Holding Solely Subordinated Debentures of the Company.” Therefore, the amount of pre-tax earnings required to cover the dividend requirements and accretion, are equal to the amount of such dividends and accretion.
 
Preferred stock dividends used in the ratio of earnings to combined fixed charges and preferred stock dividends consist of the dividends paid on our Series B Convertible Preferred Stock. These dividends are tax deductible.
 
(In millions)
   
Year Ended December 31,
  
    
2001
     
2000
     
1999
     
1998
     
1997
  
    
Restated (1)
     
Restated (2)
     
Restated (2)
     
Restated (2)
     
Restated (2)
  
Fixed charges:
                                             
Interest expense
   
$
937
 
   
$
1,090
 
   
$
842
 
   
$
763
 
   
$
632
 
Portion of rental expense which represents interest factor
   
 
111
 
   
 
115
 
   
 
132
 
   
 
145
 
   
 
140
 
    
  
  
  
  
Total fixed charges before capitalized interest and preferred security dividends of consolidated subsidiaries
   
 
1,048
 
   
 
1,205
 
   
 
974
 
   
 
908
 
   
 
772
 
Capitalized interest
   
 
—  
 
   
 
3
 
   
 
8
 
   
 
—  
 
   
 
—  
 
Preferred security dividends of consolidated subsidiaries
   
 
60
 
   
 
56
 
   
 
55
 
   
 
55
 
   
 
29
 
    
  
  
  
  
Total fixed charges
   
$
1,108
 
   
$
1,264
 
   
$
1,037
 
   
$
963
 
   
$
801
 
    
  
  
  
  
Earnings available for fixed charges:
                                             
Earnings(3)(4)
   
$
447
 
   
$
(301
)
   
$
1,336
 
   
$
61
 
   
$
1,414
 
Less: Undistributed equity in income of affiliated companies
   
 
(20
)
   
 
(25
)
   
 
(10
)
   
 
(28
)
   
 
(84
)
Add: fixed charges before capitalized interest and preferred security dividends of consolidated subsidiaries
   
 
1,048
 
   
 
1,205
 
   
 
974
 
   
 
908
 
   
 
772
 
    
  
  
  
  
Total earnings available for fixed charges
   
$
1,475
 
   
$
879
 
   
$
2,300
 
   
$
941
 
   
$
2,102
 
    
  
  
  
  
Ratio of earnings to fixed charges
   
 
1.33
 
   
 
*
 
   
 
2.22
 
   
 
*
 
   
 
2.62
 
    
  
  
  
  
 
*
 
Earnings for the years ended December 31, 2000 and 1998 were inadequate to cover fixed charges. The coverage deficiency was $385 and $22 million, respectively.
 
(1)
 
As restated. Refer to Note 21 to the consolidated financial statements included in our Form 10-K, as amended.
(2)
 
As restated. Refer to Note 2 to the consolidated financial statements in our Form 10-K, as amended .

(2)
 
Earnings is derived from our consolidated statements of income, included in our financial statements, as the Sum of: (a) Income (Loss) before Income Taxes (Benefits), Equity Income, Minorities’ Interest, Cumulative Effect of Change in Accounting Principle and Discontinued operations and (b) Equity in net income of unconsolidated affiliates.
(3)
 
Earnings include the effect of the adoption of Statement of Financial Accounting Standards No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” The applicable portion of this Statement rescinds SFAS No. 4 “Reporting Gains and Losses from Extinguishment of Debt” which required all gains and losses from extinguishment of debt to be aggregated and, when material, classified as an extraordinary item net of related income tax effect. Accordingly, any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented and that does not meet the criteria in APB Opinion No. 30 “Reporting the Results of Operations—Reporting the Effects of Disposal of a segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” for classification as an extraordinary item, was reclassified. As a result of adopting SFAS No. 145, the extraordinary gain on extinguishment of debt previously reported was reclassified to Other expenses, net and is therefore included in Earnings and Total earnings available for fixed charges in the accompanying table.
 
Xerox Corporation
Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
 
(In millions)
   
Year Ended December 31,
  
    
2001
     
2000
     
1999
     
1998
     
1997
  
    
Restated (1)
     
Restated (2)
     
Restated (2)
     
Restated (2)
     
Restated (2)
  
Fixed charges:
                                             
Interest expense
   
$
937
 
   
$
1,090
 
   
$
842
 
   
$
763
 
   
$
632
 
Portion of rental expense which represents interest factor
   
 
111
 
   
 
115
 
   
 
132
 
   
 
145
 
   
 
140
 
    
  
  
  
  
Total fixed charges before capitalized interest, preferred security dividends of consolidated subsidiaries and preferred stock dividends
   
 
1,048
 
   
 
1,205
 
   
 
974
 
   
 
908
 
   
 
772
 
Capitalized interest
   
 
—  
 
   
 
3
 
   
 
8
 
   
 
—  
 
   
 
—  
 
Preferred security dividends of consolidated subsidiaries
   
 
60
 
   
 
56
 
   
 
55
 
   
 
55
 
   
 
29
 
Preferred stock dividends
   
 
13
 
   
 
53
 
   
 
54
 
   
 
56
 
   
 
57
 
    
  
  
  
  
Total combined fixed charges and preferred stock dividends
   
$
1,121
 
   
$
1,317
 
   
$
1,091
 
   
$
1,019
 
   
$
858
 
    
  
  
  
  
Earnings available for fixed charges:
                                             
Earnings(3)(4)
   
$
447
 
   
$
(301
)
   
$
1,336
 
   
$
61
 
   
$
1,414
 
Less: Undistributed equity in income of
    affiliated companies
   
 
(20
)
   
 
(25
)
   
 
(10
)
   
 
(28
)
   
 
(84
)
Add: fixed charges before capitalized interest preferred security dividends of consolidated subsidiaries and preferred stock dividends
   
 
1,048
 
   
 
1,205
 
   
 
974
 
   
 
908
 
   
 
772
 
    
  
  
  
  
Total earnings available for fixed charges
   
$
1,475
 
   
$
879
 
   
$
2,300
 
   
$
941
 
   
$
2,102
 
    
  
  
  
  
Ratio of earnings to combined fixed charges and preferred stock dividends
   
 
1.32
 
   
 
*
 
   
 
2.11
 
   
 
*
 
   
 
2.45
 
    
  
  
  
  
 
*
 
Earnings for years ended December 31, 2000 and 1998 were inadequate to cover combined fixed charges and preferred stock dividends. The coverage deficiency was $438 and $78 million, respectively.
 
(1)
 
Same as above.
(2)
 
Same as above.
(3)
 
Same as above
(4)
 
Same as above.