UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, ~~2007~~2009


¨		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: 1001-8133

XEROX CREDIT CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware		06-1024525
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
100 First Stamford Place Stamford, Connecticut		06904
P.O. Box 4505 45 Glover Avenue Norwalk, Connecticut		06856-4505
(Address of principal executive offices)		(Zip Code)

(203) ~~325~~ 968-~~6600~~ 3000

(Registrant’s telephone number, including area code)

~~Securities~~Indicate ~~registered~~by ~~pursuant~~check tomark whether the Registrant (1) has filed all reports required to be filed by Section 1213 or 15(bd) 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 ¨

Title of Each Class		Name of Each Exchange on Which Registered
7.20% Notes due 2012		New York Stock Exchange

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨

~~Securities~~Indicate ~~registered~~by ~~pursuant~~a tocheck ~~Section 12(g)~~mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:. ~~None~~

~~Indicate~~Large byaccelerated ~~check~~filer ~~mark~~¨ Accelerated ~~whether~~filer ~~the~~¨ Non-accelerated ~~Registrant~~filer ~~(1) has~~x Smaller ~~filed~~reporting ~~all~~company ~~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.

Indicate by a check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x ¨ No ¨x

Indicate by a check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x

Indicate by a check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

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 April 30, ~~2007~~2009
Common Stock		2,000

THE REGISTRANT MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(a) AND (b) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.

Forward-Looking Statements

This Quarterly Report on Form 10-Q and any exhibits to this Report may contain “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. The primary factor is the liquidity of our ultimate parent company, Xerox Corporation. Other factors include, but are not limited to, the risks that are set forth in the “Risk Factors” section, the “Management’s Discussion and Analysis of ~~Results~~Financial ofCondition ~~Operations~~ and ~~Financial~~Results ~~Condition~~of Operations” section and other sections of this Quarterly Report on Form 10-Q, as well as in our ~~2006~~2008 Form 10-K filed with the Securities and Exchange Commission (“SEC”). The company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.

XEROX CREDIT CORPORATION

Form 10-Q

March 31, ~~2007~~2009

Table of Contents

	~~Page~~	Page
Part I—Financial Information
Part I – FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)	4
Item 1.	Financial Statements (Unaudited)	4
~~Condensed Balance Sheets~~	4Condensed Balance Sheets	4
~~Condensed Statements of Income~~	5Condensed Statements of Income	5
~~Condensed Statements of Cash Flows~~	6Condensed Statements of Cash Flows	6
~~Notes to Condensed Financial Statements~~	7Notes to Condensed Financial Statements	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8
~~Results of Operations~~	8Results of Operations	8
~~Capital Resources and Liquidity~~	8Capital Resources and Liquidity	8
Item 4. Controls and Procedures	16
	Financial Risk Management	8
Part II—Other Information
	Capital Resources and Liquidity – Xerox Corporation	9
Item 1. Legal Proceedings	17
Item 4.	Controls and Procedures	13
Item 1A. Risk Factors	17
Part II – OTHER INFORMATION
Item 6. Exhibits	18
Item 1A.	Risk Factors	14
Signatures	19
Item 6.	Exhibits	15
Exhibit(s)	20
Signatures		16
Exhibit Index		17

Exhibit 3 (a)		Articles of Incorporation of Registrant filed with the Secretary of State of Delaware on September 23, 1980, as amended by Certificates of Amendment thereto filed with the Secretary of State of Delaware on September 12, 1980 and September 19, 1988, as further amended by Certificate of Change of Registered Agent filed with the Secretary of State of Delaware on October 7, 1986, Certificate of Ownership and Merger filed with the Secretary of State of Delaware on April 30, 1992 and Certificate of Correction of Certificate of Ownership and Merger filed with the Secretary of State of Delaware on March 3, 1994.
Exhibit 3 (b)		By-Laws of Registrant, as amended through September 1, 1992.
Exhibit 31 (a)		Certification of CEO Pursuant to Rule13a-14(a) or Rule15d-14(a).
(b)		Certification of CFO Pursuant to Rule13a-14(a) or Rule15d-14(a).
Exhibit 32		Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

PART I—FINANCIAL INFORMATION

Item 1.

XEROX CREDIT CORPORATION

CONDENSED BALANCE SHEETS (UNAUDITED)

(in millions, except share data)

ASSETS


	March 31, 2009		December 31, 2008
ASSETS
Assets:
Note receivable—Xerox Corporation	$	1,092	$	1,088
Other assets		2		2

Total Assets	$	1,094	$	1,090


LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes payable after one year	$	60	$	60
Due to Xerox Corporation, net		3		3
Other liabilities		—		1

Total Liabilities		63		64

Shareholders’ Equity:
Common stock, no par value, 2,000 shares authorized, issued and outstanding		23		23
Additional paid-in-capital		219		219
Retained earnings		789		784

Total Shareholders’ Equity		1,031		1,026

Total Liabilities and Shareholders’ Equity	$	1,094	$	1,090

	March 31,2007		December 31,2006
Assets:
Note receivable—Xerox Corporation	$	1,408	$	1,422
Other assets		4		4
Total Assets	$	1,412	$	1,426
LIABILITIES AND SHAREHOLDER’S EQUITY
Liabilities:
Current portion of notes payable	$	279	$	277
Notes payable after one year		160		185
Due to Xerox Corporation, net		5		6
Other liabilities		4		4
Total Liabilities		448		472
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		722		712
Total Shareholder’s Equity		964		954
Total Liabilities and Shareholder’s Equity	$	1,412	$	1,426

The accompanying notes are an integral part of these Condensed Financial Statements.

XEROX CREDIT CORPORATION

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in millions)

	Three Months Ended March 31,
	Three Months EndedMarch 31,
	2007		2006
	2009		2008
Earned Income from Xerox note receivable	$	259	$	2414
Expenses:
Interest		81		83
Loss on derivative instruments, net		1		—
Total Expenses		1		3
General and administrative		—		—
Income before income taxes		8		11
Total Expenses		9		8
Provision for income taxes		3		4
Income before income taxes		16		16
Net Income	$	5	$	7
Provision for income taxes		6		6
Net Income	$	10	$	10

The accompanying notes are an integral part of these Condensed Financial Statements.

XEROX CREDIT CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

	Three Months Ended March 31,
	Three Months EndedMarch 31,
	2007			2006
	2009			2008
Cash Flows from Operating Activities
Net income	$	105		$	107
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on derivative instruments, net		1			—
Net change in other assets and other liabilities		—			2
Net change in other assets and other liabilities		(1	)		(25	)
Net cash provided by operating activities		5			9
Net cash provided by (used in) operating activities		10			(15	)
Cash Flows from Investing Activities
Net repayments from Xerox Corporation		15			15
Net advances to Xerox Corporation		(5	)		(9	)
Net cash provided by investing activities		15			15
Cash Flows from Financing Activities		—			—
Cash Flows from Financing Activities
Cash payments on debt		(25	)		—
Net cash used in financing activities		(25	)		—
Cash and cash equivalents, beginning of period		—			—
Cash and cash equivalents, end of period	$	—		$	—

The accompanying notes are an integral part of these Condensed Financial Statements.

XEROX CREDIT CORPORATION

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Dollars in millions, unless ~~other~~otherwise indicated)

(Note 1) – Basis of Presentation:

References herein to “we,” “us,” “our” and the “Company” refer to Xerox Credit Corporation unless the context specifically requires otherwise.

We have prepared the accompanying unaudited condensed interim financial statements in accordance with the accounting policies described in our ~~2006~~2008 Annual Report on Form 10-K (“~~2006~~2008 Annual Report”), and the interim reporting requirements of Form 10-Q. Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. You should read these Condensed Financial Statements in conjunction with the financial statements included in our ~~2006~~2008 Annual Report.

In our opinion, all adjustments which are necessary for a fair statement of financial position, operating results and cash flows for the interim periods presented have been made. Interim results of operations are not necessarily indicative of the results of the full year.

We engage in extensive intercompany transactions with Xerox Corporation (“XC” and together with its subsidiaries, “Xerox”) and receive all of our operational and administrative support from XC. Our financial statements reflect an allocation of general and administrative expenses for those costs incurred by XC on our behalf. By their nature, transactions involving related parties cannot be presumed to be carried out on the same basis as transactions among wholly-unrelated parties.

(Note 2) ~~Income Taxes:~~– Due to/from Xerox

WeDemand ~~adopted~~loans ~~the~~to ~~provisions~~XC oftotaled ~~FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an Interpretation of FASB Statement No. 109” (“FIN 48”), on January~~ $1, ~~2007. FIN 48 clarifies the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position taken or expected to~~092 beand ~~taken in a tax return that is required to be met before being recognized in~~ the ~~financial statements. FIN 48 also provides guidance on derecognition, measurement, classification,~~ interest ~~and~~rate ~~penalties, accounting~~ in ~~interim periods, disclosure and transition. There was no cumulative~~ effect ofat ~~adopting~~March 31, ~~FIN~~2009 ~~48. The total amount of unrecognized tax benefits as of the date of adoption~~ was $23.74%.

WeFrom ~~recognize~~time to time we receive non-interest ~~and~~bearing ~~penalties~~advances ~~accrued~~from onXC ~~unrecognized~~to ~~tax~~primarily ~~benefits~~cover asthe unpaid ~~well~~portion of income taxes as ~~interest~~determined ~~received~~in ~~from~~accordance ~~favorable~~with ~~settlements~~our ~~within~~Tax ~~income~~Allocation ~~tax~~Agreement ~~expense~~with XC. AsThe ofamount ~~the~~payable ~~date~~to XC was $3 as of ~~adoption~~March 31, ~~interest~~2009 and ~~penalties~~December 31, ~~accrued~~2008. ~~associated with~~This ~~unrecognized~~amount ~~tax~~is ~~benefits~~reported ~~were~~in ~~less~~our ~~than~~Condensed $1Balance Sheets as Due to Xerox Corporation, net.

We are included within the consolidated XC US federal income tax return. XC is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2005.

(3) Due to/from Xerox:

At March 31, 2007, demand loans to XC totaled $1,408 and the effective rate for the first quarter 2007 was 6.96%.

From time to time we receive non-interest bearing advances from XC to primarily cover the unpaid portion of income taxes as determined in accordance with our Tax Allocation Agreement with XC. Amounts payable to XC were $5 and $6 as of March 31, 2007 and December 31, 2006, respectively, and are reported in our Condensed Balance Sheets as Due to Xerox Corporation, net.

Intercompany cross-currency interest rate swaps with XC have net liability fair values of $21 and $22 as of March 31, 2007 and December 31, 2006, respectively and were netted against the demand loan balance.

(4) Subsequent Events:

On May 4, 2007, the Company provided notice of redemption for $25 of the Medium Term Notes due 2012. The notes are expected to be redeemed on June 5, 2007. A related charge of less than $1, primarily representing remaining deferred swap termination costs, will be recorded in interest expense in our second quarter 2007 operating results upon redemption. These notes have been reclassified to the current portion of notes payable consistent with our intent to redeem.

Item 2. ~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

~~Because~~XEROX ~~our~~CREDIT ~~liquidity~~CORPORATION is dependent upon the liquidity of XC, Item 2 includes both our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) and portions of XC’s MD&A from its Quarterly Report on Form 10-Q for the quarter ended March 31, 2007. Each MD&A, or portion thereof, is separately presented. Certain matters discussed in XC’s MD&A will relate to events and transactions that do not affect us directly.

~~RESULTS~~MANAGEMENT’S OFDISCUSSION ~~OPERATIONS—XEROX~~AND ~~CREDIT~~ANALYSIS ~~CORPORATION~~OF

~~Earned~~FINANCIAL ~~income~~CONDITION ~~from~~AND ~~the~~RESULTS ~~Master~~OF ~~Demand~~OPERATIONS Note, which represents a demand loan for accumulated cash transfers to XC, was $25 million and $24 million for the first quarters of 2007 and 2006, respectively, as interest rates and the average note balance were essentially flat between the two periods.

~~Interest~~Because our ~~expense~~liquidity ~~was~~is $8dependent ~~million~~upon ~~for~~ the ~~first~~liquidity ~~quarters~~ of ~~2007~~XC, Item 2 includes both our Management’s Discussion and ~~2006,~~Analysis ~~respectively~~of asFinancial ~~interest~~Condition ~~rates~~and Results of Operations (“MD&A”) and ~~average~~portions ~~debt~~of ~~balances~~XC’s MD&A from its ~~were~~Quarterly ~~essentially~~Report ~~flat~~on ~~between~~Form 10-Q for the ~~two~~quarter ~~periods~~ended March 31, 2009. Each MD&A, or portion thereof, is separately presented. Certain matters discussed in XC’s MD&A will relate to events and transactions that do not affect us directly.

~~The~~Results ~~effective income tax rate was 37.5% and 39.1% for the first quarters~~ of ~~2007~~Operations ~~and 2006, respectively. The primary change in effective tax rates was due to changes in the applicable state tax rates and other items.~~

Earned income from the Master Demand Note, which represents a demand loan for accumulated cash transfers to XC, was $9 million and $14 million for the first quarters of 2009 and 2008, respectively. The decrease primarily relates to lower ~~CAPITAL~~interest ~~RESOURCES~~rates ~~AND~~in ~~LIQUIDITY—XEROX~~2009 ~~CREDIT~~as ~~CORPORATION~~compared to 2008.

~~Net~~Interest ~~cash~~expense ~~provided~~was by$1 ~~operating~~million ~~activities was~~and $103 million for the first ~~quarter~~quarters of ~~2007~~2009 ~~compared~~and to2008, ~~$15 million used in the first quarter of 2006~~respectively. The decreases ~~relative~~relate ~~increase~~to inlower ~~cash~~debt ~~flow~~levels ~~of $25 million was~~ primarily ~~due~~as toa ~~the~~result ~~absence~~ of ~~prior~~regularly ~~year~~scheduled ~~first~~payments ~~quarter~~as ~~income~~well ~~tax~~as ~~payments~~our early redemption of $25 100 million ~~associated~~of ~~with~~debt ~~realized~~in ~~taxable~~the ~~gains~~third ~~from~~quarter ~~significant~~of ~~debt repayments in 2005~~2008.

~~Net~~The ~~cash~~effective ~~provided~~income bytax ~~investing~~rate ~~activities~~ was ~~$15~~37.5% ~~million for the three months ended March 31, 2007~~ and ~~2006, respectively~~37.0% ~~Cash~~for ~~provided by investing activities in 2007 consisted of an increase resulting from our collections on~~ the ~~demand~~first ~~note~~quarters of ~~$25~~2009 ~~million~~and ~~used~~2008 toreflecting ~~repay debt, partially offset by a reduction of $10 million of net advances to Xerox (~~the ~~net~~U.S. ~~advances~~federal ~~consisted~~statutory ofrate ~~additional loans to Xerox~~ of ~~$25~~35.0% ~~million from interest on the demand loan, net of $15 million used for the payment of taxes~~ and ~~interest). Cash provided by investing activities in 2006 consisted of~~ net ~~repayments~~state ~~from~~income ~~Xerox of $15 million consisting of collections on the demand note of $39 million for the payment of~~ taxes ~~and interest, partially offset by additional loans to Xerox of $24 million from interest on the demand loan~~.

~~Net~~Capital ~~cash~~Resources ~~used~~and inLiquidity financing activities was $25 million for the first quarter of 2007, reflecting the payment of our 7.00% Medium Term Notes due 2012. No cash was used in or provided by financing activities for the first quarter of 2006.

AsNet ofcash provided ~~March 31,~~by ~~2007,~~operating weactivities ~~had~~was $~~439~~5 million ofand ~~debt outstanding of which~~ $~~279~~9 million isfor ~~due in 2007 and~~ the ~~remainder~~first isquarters ~~due~~ended ~~in 2012 and thereafter. We believe that the amounts due under the Master Demand Note with XC of $1.4 billion at~~ March 31, ~~2007~~2009 ~~will~~and be2008, ~~sufficient~~respectively. toThe ~~meet~~decrease ~~our~~reflects ~~remaining~~lower ~~obligations~~net ~~as they mature~~income.

Net cash used in investing activities was $5 million and $9 million for the first quarters ended March 31, 2009 and 2008, respectively, and represents net advances to Xerox. 2009 net advances to Xerox consisted of additional loans to Xerox of $9 million from interest on the Master Demand Note, net of $4 million of collections for the payment of taxes and interest. 2008 net advances to Xerox consisted of additional loans to Xerox of $14 million from interest on the Master Demand Note, net of $5 million of collections for the payment of taxes and interest.

There was no cash provided by or used in financing activities for the first quarters of 2009 or 2008.

As of March 31, 2009, we had $60 million of debt outstanding. Of this amount, $10 million matures in 2013 and the remainder matures in 2014. We believe that the amount due under the Master Demand Note from XC of $1.1 billion at March 31, 2009 will be sufficient to meet our remaining obligations as they are redeemed or mature.

Financial Risk Management

Given the ~~limited~~ nature of our operations, our exposures are limited to the fixed interest rate ~~and currency~~ exposures embedded in the remaining unpaid debt and will further decrease over time as debt is repaid. Currently, we hold debt of $254 million that is denominated in Japanese Yen and therefore we are exposed to changes in foreign currency exchange rates that could affect our results of operations and financial condition. However, these exposures are economically hedged with intercompany cross-currency interest rate swaps with XC. In addition, the debt that is denominated in Japanese Yen matures in June 2007. Our Master Demand Note with XC earns interest at a market rate.

READER’S NOTE: THE FOLLOWING DISCUSSION HAS BEEN EXCERPTED DIRECTLY FROM XEROX CORPORATION’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, ~~2007~~2009. DEFINED TERMS HEREIN MAY NOT NECESSARILY HAVE THE SAME MEANING AS THE SAME DEFINED TERMS HAVE IN OTHER PARTS OF THIS DOCUMENT. SUCH TERMS SHOULD BE READ IN THE NARROW CONTEXT IN WHICH THEY ARE DEFINED IN THIS SECTION. REFERENCES TO “WE”, “OUR”, AND “US” REFER TO XEROX CORPORATION. ADDITIONALLY, AMOUNTS AND EXPLANATIONS CONTAINED IN THIS SECTION ARE MEANT TO GIVE THE READER ONLY A GENERAL SENSE OF XEROX XCCORPORATION’S ~~OPERATIONS,~~ CAPITAL RESOURCES AND LIQUIDITY. ACCORDINGLY, THESE EXCERPTS SHOULD BE READ IN THE CONTEXT OF THE XCXEROX CORPORATION CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, WHICH ARE ~~INCORPORATED~~INCLUDED BYIN ~~REFERENCE WITHIN~~ XEROX CORPORATION’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, ~~2007~~2009 FILED SEPARATELY WITH THE SEC.

Summary

Revenues

	Three MonthsEnded March 31,
(in millions)	2007			2006			Change
Equipment sales(1)	$	931		$	947		(2	%)
Post sale and other revenue(2)		2,700			2,535		7	%
Finance income		205			213		(4	%)
Total Revenues	$	3,836		$	3,695		4	%
Reconciliation to Condensed Consolidated Statements of Income
Sales	$	1,707		$	1,666
Less: Supplies, paper and other sales		(776	)		(719	)
Equipment sales	$	931		$	947
Service, outsourcing and rentals	$	1,924		$	1,816
Add: Supplies, paper and other sales		776			719
Post sale and other revenue	$	2,700		$	2,535
Memo: Color(3)	$	1,423		$	1,214

(1) Equipment sales reflect the results of our technology investments and the associated product launches.

(2) Post sale revenue is largely a function of the equipment placed at customer locations, the volume of prints and copies that our customers make on that equipment, the mix of color pages, as well as associated services.

(3) Color revenues represent a subset of total revenues.

First quarter 2007 total revenues grew 4% compared to the first quarter 2006. Currency had a 3-percentage point positive impact on total revenues in the quarter. Total revenues included the following:

• 7% increase in post sale and other revenue including a 3-percentage point benefit from currency. Growth in color products, DMO, global services and paper, more than offset a decline in light lens products.

• 6% increase in service, outsourcing, and rentals revenue of $1,924 million due to technical service revenue and global services growth. Supplies, paper, and other sales of $776 million grew 8% year-over-year due to supplies associated with strong color installations in previous periods and higher paper price levels.

• 2% decline in equipment sales, including a 2-percentage point benefit from currency. Strong install activity in office color multifunction and high-end production color were more than offset by overall price declines

between 5% and 10% and declines in black-and-white products and color printers. More than two-thirds of the first quarter 2007 equipment sales were generated from products launched in the past 24 months.

• 17% growth in color revenue. Color revenue of $1,423 million comprised 37% of total revenue in the first quarter 2007 compared to 33% in the first quarter 2006, reflecting:

o 22% growth in color post sale and other revenue. Color represented 34% of post sale and other revenue in the first quarter 2007 versus 29% in the first quarter 2006.

o 9% growth in color equipment sales. Color sales represented 48% of total equipment sales in the first quarter 2007 versus 43% in the first quarter 2006.

o 29% growth in color pages. Color pages represented 11% of total pages in the first quarter 2007 versus 8% in the first quarter 2006.

• 4% decline in finance income including a 2-percentage point benefit from currency.

Net Income

First quarter 2007 net income of $233 million, or $0.24 per diluted share increased $33 million or $0.04 per diluted share from the first quarter 2006, primarily reflecting:

• Gross profit increase of $72 million due to increased revenue of $141 million as well as an improvement in gross margin of 0.4-percentage points.

• Reductions in R,D&E and SAG of $36 million due primarily to continued cost management efforts.

• In addition, a decrease in equity income of $33 million including a $23 million charge for our share of a previously disclosed Fuji Xerox restructuring charge.

Capital Resources and Liquidity

The following table summarizes our cash ~~flows~~ and cash, ~~cash~~ equivalents ~~and short-term investments as of and for the three months ended March 31, 2007 and 2006~~:

	Three Months Ended
	Three MonthsEnded March 31,
	March 31,
(in millions)	2009			2008				Change
(in millions)	2007			2006			AmountChange
Net cash provided by operating activities	$	22		$	52			$	(30	)
Net cash provided by operating activities	$	187		$	147		$	40
Net cash used in investing activities		(207	)		(65	)			(142	)
Net cash provided by investing activities		16			56			(40	)
Net cash used in financing activities		(482	)		(250	)			(232	)
Net cash (used in) provided by financing activities		(390	)		62			(452	)
Effect of exchange rate changes on cash and cash equivalents		(13	)		6				(19	)
Effect of exchange rate changes on cash and cash equivalents		6			11			(5	)
Decrease in cash and cash equivalents		(680	)		(257	)			(423	)
(Decrease) increase in cash and cash equivalents		(181	)		276			(457	)
Cash and cash equivalents at beginning of period		1,229			1,099				130
Cash and cash equivalents at beginning of period		1,399			1,322			77
Cash and cash equivalents at end of period	$	549		$	842			$	(293	)
Cash and cash equivalents at end of period		1,218			1,598			(380	)
Short-term investments		65			196			(131	)
Total cash, cash equivalents and short-term investments	$	1,283		$	1,794		$	(511	)

Cash Flows from Operating Activities

Net cash provided by operating activities ofwas $~~187~~22 million in the first quarter ~~2007~~2009. ~~increased~~The $4030 million decrease in cash from first quarter ~~2006~~2008 was primarily due to the following:

• $~~121~~206 million ~~increase~~decrease in pre-tax income before litigation.

• $2550 million ~~increase~~decrease due to ~~lower~~higher ~~net~~restructuring ~~tax~~ payments ~~primarily~~related ~~reflecting~~to ~~refunds~~previously ~~received~~reported ~~in 2007 of prior year estimated tax payments~~actions.

• $7128 million decrease due to ~~higher~~net ~~inventories~~payments ~~primarily~~for ~~associated~~the ~~with~~settlement ~~our~~of ~~2007~~securities-related ~~product launches~~litigation.

• $17195 million ~~decrease~~increase ~~due~~from tocollections aon ~~lower~~receivables ~~net~~exceeding ~~run-off~~new ofbillings. ~~finance~~Collections ~~receivables~~in as the ~~decline~~first inquarter ~~new~~2009 ~~finance~~and ~~receivable~~2008 ~~originations~~include ~~has~~the ~~moderated~~benefit ~~over~~from the ~~past~~sales ~~several~~of ~~years~~accounts receivables.

• $1624 million ~~decrease~~increase due to ~~higher~~lower ~~accounts~~inventory ~~receivable~~growth asreflecting ainventory ~~result~~supply ofchain ~~an increase in revenues partially offset by a $29 million sale of receivables~~management.

10• $14 million increase due to lower placements of equipment on operating leases reflecting lower install activity.

Cash Flows from Investing Activities

Net cash ~~provided~~used by in investing activities ofwas $16207 million in the first quarter ~~2007~~2009. ~~decreased~~The $40142 million decrease in cash from first quarter ~~2006~~2008 was primarily due to ~~the~~GIS’s ~~following:~~acquisition of ComDoc, Inc.

• $138 million decrease in proceeds from divestitures and investments, as 2006 included $117 million distribution related to the sale of investments held by Ridge Re and a $21 million distribution from the liquidation of our investment in Xerox Capital LLC.

• $37 million decrease due to higher capital expenditures and internal use software.

• $109 million increase primarily due to the absence of the first quarter 2006 $103 million escrow deposit relating to the MPI litigation.

• $24 million increase in net proceeds from sales of short-term investments.

Cash Flows from Financing Activities

Net cash used in financing activities was $~~390~~482 million in the first ~~quarter~~ ~~2007~~quarter 2009. The $232 million decrease in cash ~~of $452 million~~ from first quarter ~~2006~~2008 was primarily due to the following:

• $~~689~~663 million decrease ~~due~~from tohigher net repayments on other debt. First quarter 2009 reflects the ~~absence~~repayment of ~~the~~2009 Senior Notes of $879 million, net proceeds ~~received~~of $503 million from borrowings under the ~~March~~Credit ~~2006~~Facility ~~issuance~~and net payments of ~~the~~$41 6million primarily for foreign short-term borrowings.4% ~~Senior~~First ~~Notes~~quarter 2008 reflects $325 million borrowings under the Credit Facility, partially offset by an $81 million repayment of a Euro bank facility.

• $~~100~~335 million increase due to the ~~first~~absence ~~quarter 2006 payment~~ of ~~our~~purchases ~~liability~~under tothe ~~Xerox~~Company’s ~~Capital~~share ~~LLC~~repurchase ~~in connection with their redemption of Canadian deferred preferred shares~~program.

•9 ~~$89 million increase due to lower first quarter 2007 net repayments on secured debt.~~

•Table $14 million increase relating to the first quarter 2006 payment of preferred stock dividends. The conversion of our Series C Mandatory Convertible Preferred Stock occurred in the third quarter 2006.Contents

• $1363 million increase due to lower ~~purchases~~net ~~under~~repayments on secured debt, reflecting continued run-off of our ~~share~~U.S. ~~repurchase~~secured borrowing program.

• $1032 million increase due to ~~higher proceeds from~~ the ~~issuance~~absence of ~~common~~repurchases ~~stock,~~related ~~resulting~~to ~~from increases in exercised~~ stock-based ~~options~~compensation.

Customer Financing Activities ~~and Debt~~

The following represents our total finance assets associated with our lease and finance operations:

	March 31,2007		December 31,2006
(in millions)	March 31,2009		December 31,2008
Total Finance receivables, net (1)	$	76,~~728~~962	$	7,~~844~~278
Equipment on operating leases, net		~~492~~566		~~481~~594
Total Finance Assets, net	$	87,~~220~~528	$	87,~~325~~872

⁽¹⁾

Includes (i) billed portion of finance receivables, net, (ii) finance receivables, net and (iii) finance receivables due after one year, net as included in our Condensed Consolidated Balance Sheets.

AsThe ofreduction ~~March 31, 2007, approximately 27%~~ of ~~total~~$344 ~~debt~~million ~~was~~in ~~secured~~Total by finance ~~receivables and other~~ assets ~~compared to 29% at December 31~~, ~~2006.~~net ~~Our~~includes ~~debt~~unfavorable ~~maturities~~currency ~~are~~of as$178 ~~follows:~~million.

The following summarizes our debt as of March 31, 2009 and December 31, 2008:


(in millions)	March 31, 2009			December 31, 2008
Principal debt balance	$	7,735		$	8,201
Less: Net unamortized discount		(6	)		(6	)
Add: SFAS No. 133 fair value adjustments		170			189

Total Debt		7,899			8,384
Less: current maturities and short-term debt		(641	)		(1,610	)

Total Long-Term Debt	$	7,258		$	6,774

Sales of Accounts Receivables

During the first quarter 2009 we sold $237 million of accounts receivables without recourse, as compared to $246 million in the fourth quarter 2008. Fees associated with these sales were approximately $2 million in each period. $228 million of receivables sold remained uncollected by the third party purchaser as of March 31, 2009.

Liquidity, Financial Flexibility and Funding Plans

We manage our worldwide liquidity using internal cash management practices, which are subject to 1) the statutes, regulations and practices of each of the local jurisdictions in which we operate, 2) the legal requirements of the agreements to which we are a party and 3) the policies and cooperation of the financial institutions we utilize to maintain and provide cash management services.

We are currently rated investment grade by all major rating agencies. As of March 31, 2009 the ratings for our senior unsecured debt were as follows:


	Senior Unsecured Debt	Outlook

Moody’s	Baa2	Stable

Standard & Poors (“S&P”)	BBB	Negative

Fitch	BBB	Negative

The following is a discussion of our liquidity position as of March 31, 2009:

•

As of March 31, 2009, total cash and cash equivalents was $549 million and our borrowing capacity under our Credit Facility was $1.2 billion, reflecting $749 million outstanding borrowings and no outstanding letters of credit. In addition, we currently have approximately $1.0 billion available under the Loan Agreement through 2010, which has not been accessed in almost three years.

•

Cash flows from operations were $22 million and $52 million for the three months ended March 31, 2009 and 2008, respectively. Cash flows from operations were $939 million for the 2008 full-year and included $615 million in net payments for securities litigation. We expect 2009 full-year operating cash flows of about $1.3 billion.

•

First quarter 2009 total debt decreased by $485 million and we expect to reduce debt by over $1 billion for the full-year. Our debt maturities are in line with historical and projected cash flows and are spread over the next ten years as follows (in millions):


Year	Amount
Q2 2009	$	29
Q3 2009		448
Q4 2009		158
2010		966
2011		802
2012		1,325
2013		1,485
2014		69
2015		—
2016		951
2017		501
2018 and thereafter		1,001

Total	$	7,735

Contractual Cash Obligations and Other Commercial Commitments and Contingencies

In February 2009, we signed a six year contract with Hindustan Computers Limited (“HCL”) for approximately $100 million for mid range processing services in North America and Europe. This contract replaces the EDS server management contract, which expires in June 2009.

	UnsecuredDebt		Debt Securedby FinanceReceivables		OtherSecured Debt		Total Debt
Second Quarter	$	303	$	149	$	3	$	455
Third Quarter		3		188		3		194
Fourth Quarter		2		659		3		664
2007		308		996		9		1,313
2008		8		719		6		733
2009		1,058		101		5		1,164
2010		689		49		2		740
2011		802		10		—		812
Thereafter		2,188		1		3		2,192
Total	$	5,053	$	1,876	$	25	$	6,954

Financial Risk Management

~~Liquidity~~We are exposed to market risk from changes in foreign currency exchange rates and interest rates, ~~Financial~~which ~~Flexibility~~could affect operating results, financial position and ~~Funding~~cash ~~Plans:~~flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic exposures as well as to reduce earnings and cash flow volatility resulting from shifts in market rates. We enter into limited types of derivative contracts, including interest rate swap agreements, foreign currency spot, forward and swap contracts and net purchased foreign currency options to manage interest rate and foreign currency exposures. Our primary foreign currency market exposures include the Yen, Euro, and Pound Sterling. The fair market values of all our derivative contracts change with fluctuations in interest rates and/or currency rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes.

We ~~manage~~are ~~our~~required ~~worldwide~~to ~~liquidity~~recognize ~~using~~all ~~internal~~derivative ~~cash~~instruments ~~management~~as ~~practices,~~either ~~which~~assets ~~are~~or ~~subject~~liabilities toat ~~(1)~~ fair value in the ~~statutes~~balance sheet. As permitted, ~~regulations~~certain ~~and~~of ~~practices~~these derivative contracts have been designated for hedge accounting treatment. Certain of our derivatives that do not qualify for hedge accounting are effective as economic hedges. These derivative contracts are likewise required to be recognized each ofperiod ~~the~~at ~~local~~fair ~~jurisdictions~~value and therefore do result in ~~which~~some welevel ~~operate,~~of ~~(2) the~~volatility. ~~legal~~The ~~requirements~~level of volatility will vary with the ~~agreements~~type toand ~~which~~amount weof ~~are~~derivative ahedges ~~party~~outstanding, ~~and~~as ~~(3)~~ well as fluctuations in the ~~policies~~currency and ~~cooperation~~interest ofrate markets during the ~~financial~~period. ~~institutions~~The related wecash ~~utilize~~flow toimpacts ~~maintain~~of ~~and~~all ~~provide~~of our derivative activities are reflected as cash ~~management~~flows ~~services~~from operating activities.

~~Our~~By their nature, all derivative instruments involve, to varying degrees, elements of market and credit ~~ratings~~risk. asThe market risk associated with these instruments resulting from currency exchange and interest rate movements is expected to offset the market risk of ~~March 31~~the underlying transactions, ~~2007~~assets ~~were~~and asliabilities ~~follows:~~being hedged. We do not believe there is significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a diversified group of major financial institutions. Further, our policy is to deal with counterparties having a minimum investment grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

	Senior UnsecuredDebt	Outlook	Comments
Moody’s Investors Service(1)	Baa3	Positive	The Moody’s rating was upgraded from Ba1 in November 2006. The outlook remains positive since being upgraded in November 2006.
Standard & Poors (“S&P”)(2)	BB+	Positive	The S&P rating was upgraded from BB- in March 2006 and the outlook was revised from stable to positive in January 2007. The rating was put on Credit Watch with positive implications on April 2, 2007.
Fitch Ratings(3)	BBB-	Stable	The Fitch rating was upgraded from BB+ in August 2006.

The current market events have not required us to materially modify or change our financial risk management strategies with respect to our exposures to interest rate and foreign currency risk. Refer to Note 9 – Financial Instruments – for further discussion and information on our financial risk management strategies.

~~(1) In November 2006, Moody~~READER’sS ~~upgraded~~NOTE: ~~the~~THIS ~~Senior~~CONCLUDES ~~Unsecured~~THE ~~rating~~DISCUSSION ~~from~~EXCERPTED ~~Ba1~~DIRECTLY toFROM ~~Baa3,~~XEROX ~~a one notch upgrade. Moody~~CORPORATION’sS ~~maintains~~QUARTERLY aREPORT ~~Positive~~ON ~~Outlook~~FORM on the credit. In conjunction with the upgrade to investment grade ratings for the senior unsecured debt, Moody’s has withdrawn all Loss Given Default assessments and Speculative Grade Liquidity ratings as they are only appropriate for non10-~~investment~~Q ~~grade~~FOR ~~issuers.~~THE ~~Moody’s~~QUARTER ~~ratings~~ENDED ~~upgrades~~MARCH also included: Senior unsecured shelf registration to Baa3 from Ba1; Trust preferred to Ba1 from Ba2; subordinated shelf registration to Ba1 from Ba2 and preferred shelf registration to Ba1 from Ba2. On April 231, ~~2007, Moody’s affirmed its ratings and positive outlook on Xerox, stating they are not affected by the Company’s potential acquisition of Global Imaging Systems~~2009.

(2) In March 2006, S&P upgraded the Senior Unsecured and Corporate Credit rating from BB- to BB+, a two notch upgrade. At the same time, S&P revised its outlook from Positive to Stable on all associated ratings, affirmed the short-term speculative-grade rating at B-1 and upgraded the ratings on Subordinated debt from B to BB- and Preferred Stock from B- to B+. As a result of the rating change, S&P removed Xerox from Credit Watch in March 2006. In January 2007, S&P revised its outlook from Stable to Positive on all associated ratings. On April 2, 2007, S&P placed its ratings of Xerox on CreditWatch with positive implications, reflecting the announcement of the agreement in principal to acquire Global Imaging Systems. S&P stated further that following the completion of the acquisition the corporate credit rating would be raised to BBB- (an investment grade rating), with a stable outlook.

(3) In August 2006, Fitch upgraded its debt ratings and assigned a stable outlook on Xerox. Fitch had upgraded the senior unsecured debt of Xerox from BB+ to BBB- and also upgraded the Trust Preferred securities from BB- to BB, both one notch upgrades. On April 2, 2007, Fitch affirmed Xerox’s ratings and stable outlook following Xerox’s announcement of an agreement in principal to acquire Global Imaging Systems.

Our credit ratings, which are periodically reviewed by major rating agencies, have substantially improved over the past three years. We are currently rated investment grade by Moody’s Investors Service and Fitch Ratings. As noted above, S&P has stated that upon the completion of the acquisition of Global Imaging Systems, it will raise our corporate credit rating to BBB-, an investment grade rating.

Agreement to Acquire Global Imaging Systems, Inc. (“Global Imaging”):

The agreement to acquire Global Imaging for $1.5 billion is an all-cash transaction and is structured as a two-step acquisition including a cash tender offer for all outstanding shares of Global Imaging common stock, followed by a cash merger in which we would acquire any remaining outstanding shares. We plan to fund the Global Imaging acquisition with a combination of cash on hand and by borrowing under our 2006 Credit Facility. We expect amounts borrowed under the 2006 Credit Facility will be paid down during the balance of 2007 using cash flows from operations. Although we intend to continue our share repurchase program, repurchases are expected to be at a slower rate for the remainder of 2007 as cash flows from operations are directed to repay borrowings for the Global Imaging acquisition.

Summary—Financial Flexibility and Liquidity:

Our liquidity is a function of our ability to successfully generate cash flows from a combination of efficient operations and improvement therein, access to capital markets, securitizations, funding from third parties and borrowings secured by our finance receivables portfolios. As of March 31, 2007, total cash, cash equivalents and short-term investments was $1.3 billion and our borrowing capacity under our 2006 Credit Facility was $1.235 billion, reflecting no outstanding borrowings and outstanding letters of credit totaling $15 million. Our ability to maintain positive liquidity going forward depends on our ability to continue to generate cash from operations and have access to the financial markets, both of which are subject to general economic, financial, competitive, legislative, regulatory and other market factors that are beyond our control.

Financial Risk Management

We are exposed to market risk from foreign currency exchange rates and interest rates, which could affect operating results, financial position and cash flows. We manage our exposure to these market risks through our regular operating and financing activities and, when appropriate, through the use of derivative financial instruments. These derivative financial instruments are utilized to hedge economic exposures as well as reduce earnings and cash flow volatility resulting from shifts in market rates. As permitted, certain of these derivative contracts have been designated for hedge accounting treatment under SFAS No. 133. Certain of our derivatives do not qualify for hedge accounting but are effective as economic hedges of our inventory purchases and

currency exposure. These derivative contracts are accounted for using the mark-to-market accounting method and accordingly are exposed to some level of volatility. Under this method, the contracts are carried at their fair value on our Condensed Consolidated Balance Sheets within Other assets and Other liabilities. The level of volatility will vary with the type and amount of derivative hedges outstanding, as well as fluctuations in the currency and interest rate market during the period. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.

We enter into limited types of derivative contracts, including interest rate and cross currency interest rate swap agreements, foreign currency spot, forward and swap contracts and net purchased foreign currency options to manage foreign currency exposures. Our primary foreign currency market exposures include the Japanese Yen, Euro, British Pound Sterling, Canadian Dollar and Brazilian Real. The fair market values of all our derivative contracts change with fluctuations in interest rates and/or currency rates and are designed so that any changes in their values are offset by changes in the values of the underlying exposures. Derivative financial instruments are held solely as risk management tools and not for trading or speculative purposes.

By their nature, all derivative instruments involve, to varying degrees, elements of market and credit risk not recognized in our financial statements. The market risk associated with these instruments resulting from currency exchange and interest rate movements is expected to offset the market risk of the underlying transactions, assets and liabilities being hedged. We do not believe there is a significant risk of loss in the event of non-performance by the counterparties associated with these instruments because these transactions are executed with a diversified group of major financial institutions. Further, our policy is to deal with counterparties having a minimum investment-grade or better credit rating. Credit risk is managed through the continuous monitoring of exposures to such counterparties.

Some of our derivative and other material contracts at March 31, 2007 require us to post cash collateral or maintain minimum cash balances in escrow. These cash amounts are reported in our Condensed Consolidated Balance Sheets within Other current assets or Other long-term assets, depending on when the cash will be contractually released.

READER’S NOTE: THIS CONCLUDES THE DISCUSSION EXCERPTED DIRECTLY FROM XEROX CORPORATION’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2007.

READER’S NOTE: THE FOLLOWING DISCUSSION HAS BEEN EXCERPTED DIRECTLY FROM THE XEROX CORPORATION CURRENT REPORT ON FORM 8-K DATED APRIL 30, 2007 WHICH IS BEING INCLUDED HEREIN GIVEN ITS RELEVANCE TO XEROX CORPORATION’S LIQUIDITY.

On April 30, 2007, Xerox Corporation (“Xerox” or “we”) amended and restated its $1.25 billion unsecured revolving credit facility that was entered into in April 2006 (the “2006 Credit Facility”). The amended and restated facility, with affiliates of Citibank, N.A. and JPMorgan Chase Bank, N.A., as lead arrangers and bookrunners, and a group of lenders (the “2007 Credit Facility”), has been increased to $2 billion and includes a $300 million letter of credit subfacility. The 2007 Credit Facility also includes an accordion feature, which would allow us to increase from time to time, with willing lenders, the overall size of the facility to an aggregate amount not to exceed $2.5 billion. The 2007 Credit Facility matures on April 30, 2012, although we have the right to request a one year extension on each of the first and second anniversaries of the facility.

On April 30, 2007, Xerox also entered into a $1 billion interim bridge credit facility with Citibank, N.A., as administrative agent, Citigroup Global Markets Inc. and J. P. Morgan Securities Inc., as joint lead arrangers and joint bookrunners, and a group of lenders (the “Interim Facility”, each of the “2007 Credit Facility” and the “Interim Facility” individually a “facility”, and collectively the “facilities”). The Interim Facility matures on April 28, 2008.

The proceeds of the facilities will be used to provide working capital for Xerox and its subsidiaries and for general corporate purposes.

Our obligations under the facilities are unsecured and are not guaranteed by any of our subsidiaries. However, if in the future any of our domestic subsidiaries guarantees any debt for money borrowed by Xerox of more than $100 million, that subsidiary is required to guaranty Xerox’s obligations under the facilities as well. In the event any of our subsidiaries borrows under the 2007 Credit Facility, its borrowings thereunder would be guaranteed by Xerox.

The facilities contain various conditions to borrowing, events of default and affirmative, negative and financial maintenance covenants, which are substantially identical to those included in the 2006 Credit Facility, which are described in our Annual Report on Form 10-K for the year ended December 31, 2006.

READER’S NOTE: THIS CONCLUDES THE DISCUSSION EXCERPTED DIRECTLY FROM THE XEROX CORPORATION CURRENT REPORT ON FORM 8-K DATED APRIL 30, 2007.

Item 4.

Controls and Procedures

(a)	Evaluation of Disclosure Controls and Procedures

The Company’s management evaluated, with the participation of our principal executive officer and principal financial officer, or persons performing similar functions, the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that information we are required to disclose in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms relating to Xerox Credit Corporation, and was accumulated and communicated to the Company’s management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

(b)	Changes in Internal Controls

In connection with the evaluation required by paragraph (d) of Rule 13a-15 under the Exchange Act, there was no change identified in our internal control over financial reporting that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

1613

PART II—OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A.

Risk Factors

Our liquidity is dependent on the liquidity of Xerox XCCorporation, as our sole monetary asset is the Master Demand Note.

As of March 31, ~~2007~~2009, our sole monetary asset is the Master Demand Note from Xerox Corporation. As a result, our liquidity is dependent upon the liquidity of XC. Accordingly, certain disclosures contained herein relate to events and transactions that affect the liquidity of Xerox.

Xerox ~~Corporation~~’s ~~operating~~liquidity ~~results~~is ~~and~~a ~~liquidity~~function ~~have~~of ~~improved~~its ~~over~~ability ~~the~~to ~~last~~successfully ~~several~~generate ~~years~~cash ~~which~~flow ~~further~~from ~~mitigate~~a ~~realizability~~combination ~~risk~~ of ~~our~~efficient operations and improvement therein, access to ~~Master~~capital ~~Demand~~markets, ~~Note~~securitizations, funding from third parties and borrowings secured by Xerox’s finance receivables portfolios. ~~Specifically~~As of March 31, ~~Xerox~~2009, ~~Corporation~~Xerox’s ~~net~~total ~~income~~cash and cash equivalents was $549 million, and its borrowing capacity under its Credit Facility was $1.212 billion, ~~$978~~reflecting ~~million~~outstanding ~~and~~borrowings of $~~859~~749 million. ~~for~~Xerox ~~the~~also ~~years~~has ~~ended~~funding ~~December 31,~~available ~~2006,~~through ~~2005~~a ~~and~~secured ~~2004,~~borrowing ~~respectively~~arrangement with General Electric Capital Corporation. ~~Operating~~Xerox believes its liquidity (including operating and other cash flows ofthat it expects to generate) will be sufficient to meet operating requirements as they occur; however, Xerox’s ~~Corporation~~ability ~~were~~to ~~$1.62~~maintain sufficient liquidity going forward depends on its ability to generate ~~billion,~~cash ~~$1.42~~from ~~billion~~operations and ~~$1.75~~access ~~billion~~to ~~for~~ the ~~years~~capital ~~ended December 31~~markets, ~~2006~~secured borrowings, ~~2005~~securitizations and ~~2004,~~funding ~~respectively.~~from Inthird ~~addition~~parties, ~~Xerox~~all ~~Corporation’s~~of ~~credit~~which ~~ratings~~are ~~were~~subject ~~improved~~ to ~~investment~~general ~~grade~~economic, ~~for~~financial, ~~Moody’s~~competitive, legislative, regulatory and ~~Fitch~~other ~~during~~market ~~2006.~~factors that are beyond its control.

~~Xerox’s~~14 liquidity is a function of its ability to successfully generate cash flow from a combination of efficient operations and improvement therein, access to capital markets, securitizations, funding from third parties and borrowings secured by Xerox’s finance receivables portfolios. As of March 31, 2007, Xerox’s total cash, cash equivalents and short-term investments was $1.3 billion, and as of April 30, 2007, its borrowing capacity under its $2.0 billion 2007 Credit Facility and $1.0 billion 2007 Interim Bridge Credit Facility was approximately $2.985 billion, reflecting no outstanding borrowings and $15 million of letters of credit that have been utilized. Xerox also has funding available through various secured borrowing arrangements. Xerox believes its liquidity (including operating and other cash flows that it expects to generate) will be sufficient to meet operating requirements as they occur; however, Xerox’s ability to maintain sufficient liquidity going forward depends on its ability to generate cash from operations and access to the capital markets, secured borrowings, securitizations and funding from third parties, all of which are subject to general economic, financial, competitive, legislative, regulatory and other market factors that are beyond its control.

Item 6.

Exhibits

Exhibit 3	(a)	Articles of Incorporation of Registrant filed with the Secretary of State of Delaware on September 23, 1980, as amended by Certificates of Amendment thereto filed with the Secretary of State of Delaware on September 12, 1980 and September 19, 1988, as further amended by Certificate of Change of Registered Agent filed with the Secretary of State of Delaware on October 7, 1986, Certificate of Ownership and Merger filed with the Secretary of State of Delaware on April 30, 1992 and Certificate of Correction of Certificate of Ownership and Merger filed with the Secretary of State of Delaware on March 3, 1994.
		Incorporated by reference to Exhibit 3(a) to Registrant’s Annual Report on Form 10-K for the Year Ended December 31, 2004.
	(b)	By-Laws of Registrant, as amended through September 1, 1992.
Exhibit 3	(b)	By-Laws of Registrant, as amended and restated through September 1, 1992.
		Incorporated by reference to Exhibit 3(b) to Registrant’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2006.
Exhibit 31	(a)	Certification of CEO Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
	(b)	Certification of CFO Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Exhibit 31	(b)	Certification of CFO Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Exhibit 32		Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

1815

SIGNATURES

Pursuant to the requirements 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 (Registrant)
	XEROX CREDIT CORPORATION
Date: May 9, 2007		BY:	/S/ JOHN F. RIVERA
	(Registrant)
			John F. Rivera Vice President, Treasurer and Chief Financial Officer
Date: May 8, 2009	BY:	/s/ John F. Rivera
		John F. Rivera
		Vice President, Treasurer and Chief Financial Officer

1916

~~Exhibits~~Exhibit Index

Exhibit 3	(a)	)	Articles of Incorporation of Registrant filed with the Secretary of State of Delaware on September 23, 1980, as amended by Certificates of Amendment thereto filed with the Secretary of State of Delaware on September 12, 1980 and September 19, 1988, as further amended by Certificate of Change of Registered Agent filed with the Secretary of State of Delaware on October 7, 1986, Certificate of Ownership and Merger filed with the Secretary of State of Delaware on April 30, 1992 and Certificate of Correction of Certificate of Ownership and Merger filed with the Secretary of State of Delaware on March 3, 1994.	Articles of Incorporation of Registrant filed with the Secretary of State of Delaware on September 23, 1980, as amended by Certificates of Amendment thereto filed with the Secretary of State of Delaware on September 12, 1980 and September 19, 1988, as further amended by Certificate of Change of Registered Agent filed with the Secretary of State of Delaware on October 7, 1986, Certificate of Ownership and Merger filed with the Secretary of State of Delaware on April 30, 1992 and Certificate of Correction of Certificate of Ownership and Merger filed with the Secretary of State of Delaware on March 3, 1994.
			Incorporated by reference to Exhibit 3(a) to Registrant’s Annual Report on Form 10-K for the Year Ended December 31, 2004.	~~Incorporated by reference to Exhibit 3(a) to Registrant’s Annual Report on Form 10-K for the Year Ended December 31, 2004.~~
				By-Laws of Registrant, as amended through September 1, 1992.
Exhibit 3	(b)		By-Laws of Registrant, as amended and restated through September 1, 1992.
			Incorporated by reference to Exhibit 3(b) to Registrant’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2006.	~~Incorporated by reference to Exhibit 3(b) to Registrant’s Quarterly Report on Form 10-Q for the Quarter Ended June 30, 2006.~~
Exhibit 31	(a)	)	Certification of CEO Pursuant to Rule 13a-14(a) or Rule 15d-14(a).	~~Certification of CEO Pursuant to Rule13a-14(a) or Rule15d-14(a).~~
	(b	)		Certification of CFO Pursuant to Rule13a-14(a) or Rule15d-14(a).
Exhibit 31	(b)		Certification of CFO Pursuant to Rule 13a-14(a) or Rule 15d-14(a).
Exhibit 32			Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	~~Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~

2017

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