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

~~ACT~~For OFthe ~~1934~~quarterly period ended: September 30, 2009

For the quarterly period ended: June 30, 2009

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

ACT OF 1934

For the transition period from to

Commission file number: 001-8133

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.)
P.O. Box 4505 45 Glover Avenue Norwalk, Connecticut		06856-4505
(Address of principal executive offices)		(Zip Code)

P.O. Box 4505

45 Glover Avenue

Norwalk, Connecticut

06856-4505

(Address of principal executive offices)

(Zip Code)

(203) 968-3000

(Registrant’s telephone number, including area code)

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 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 ¨

Indicate by a check 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.

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

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 ~~July~~September 3130, 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 Financial Condition and Results of Operations” section and other sections of this Quarterly Report on Form 10-Q, as well as in our Quarterly Report on Form 10-Q for the ~~quarter~~quarters ended March 31, 2009 and June 30, 2009 and our 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

~~June~~September 30, 2009

Table of Contents

		Page
Part I – FINANCIAL INFORMATION		4
Item 1.	Financial Statements (Unaudited)	4
	Condensed Balance Sheets	4
	Condensed Statements of Income	5
	Condensed Statements of Cash Flows	6
	Notes to Condensed Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	89
	Results of Operations	89
	Capital Resources and Liquidity	89
	Financial Risk Management	89
	Capital Resources and Liquidity – Xerox Corporation	910
Item 4.	Controls and Procedures	1415
Part II – OTHER INFORMATION		15
Part II - OTHER INFORMATION		16
Item 1A.	Risk Factors	1516
Item 6.	Exhibits	1617
Signatures		1718
Exhibit Index		1819

PART I—FINANCIAL INFORMATION

Item 1.

XEROX CREDIT CORPORATION

CONDENSED BALANCE SHEETS (UNAUDITED)

(in millions, except share data)

	June 30,2009		December 31,2008
	September 30,2009		December 31,2008
ASSETS
Assets:
Note receivable—Xerox Corporation	$	1,099	$	1,088
Note receivable - Xerox Corporation	$	1,105	$	1,088
Other assets		2		2
Total Assets	$	1,~~101~~107	$	1,090
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Notes payable after one year	$	60	$	60
Due to Xerox Corporation, net		34		3
Other liabilities		1—		1
Total Liabilities		64		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		~~795~~801		784
Total Shareholders’ Equity		1,~~037~~043		1,026
Total Liabilities and Shareholders’ Equity	$	1,~~101~~107	$	1,090

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

XEROX CREDIT CORPORATION

CONDENSED STATEMENTS OF INCOME (UNAUDITED)

(in millions)

	Three Months EndedJune 30,				Six Months EndedJune 30,
	Three Months EndedSeptember 30,				Nine Months EndedSeptember 30,
	2009		2008		2009		2008
Earned Income from Xerox note receivable	$	11	$	1615	$	2031	$	3045
Expenses:
Interest		1		23		23		58
General and administrative		—1		1—		—1		1
Total Expenses		12		3		24		69
Income before income taxes		109		1312		1827		2436
Provision for income taxes		43		54		710		913
Net Income	$	6	$	8	$	1117	$	1523

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

XEROX CREDIT CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in millions)

	Six Months EndedJune 30,
	Nine Months EndedSeptember 30,
	2009			2008
Cash Flows from Operating Activities
Net income	$	1117		$	1523
Adjustments to reconcile net income to net cash provided by operating activities:
Net change in other assets and other liabilities		1			—3
Net cash provided by operating activities		1218			1526
Cash Flows from Investing Activities
Net advances to Xerox Corporation		(12	)		(15	)
Net (advances to) repayments from Xerox Corporation		(18	)		74
Cash Flows from Financing Activities		—			—
Cash payments on debt		—			(100	)
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.

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 2008 Annual Report on Form 10-K (“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 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 - Due to/from Xerox

Demand loans to XC totaled $1,~~099~~105 and the interest rate in effect at ~~June~~September 30, 2009 was 3.9863%.

From time to time we receive non-interest bearing advances from XC XC to primarily cover the unpaid portion of income taxes as determined in accordance with our Tax Allocation Agreement with XC. The amount payable to XC was $34 as of ~~June~~September 30, 2009 and $3 as of December 31, 2008. This amount is reported in our Condensed Balance Sheet as Due to Xerox Corporation, net.

Note 3 - Recent Accounting Pronouncements

In June 2009, the FASB issued ~~SFAS~~Accounting Standards Update No. ~~168~~2009-01, “~~The FASB Accounting Standards Codification™ and the Hierarchy of~~ Generally Accepted Accounting Principles” a(ASC ~~replacement~~Topic of105) ~~SFAS~~which ~~No. 162,~~establishes ~~“Hierarchy~~the FASB ~~of Generally Accepted~~ Accounting ~~Principles”~~Standards Codification (“the Codification”). ~~The~~or ~~Codification~~“ASC”) isas the official single source of authoritative U.S. generally accepted accounting principles (“GAAP”). All existing accounting standards are superseded. All other accounting guidance not included in the Codification will be considered non-authoritative. The Codification also includes all relevant Securities and Exchange Commission (“SEC”) guidance organized using the same topical structure in separate sections within the Codification. The Codification is effective for our third-quarter 2009 financial statements. The Codification is not expected to change GAAP. The principal impact on our financial statements from the Codification adoption is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification.

InFollowing ~~May~~the ~~2009~~Codification, the ~~FASB~~Board ~~issued~~will ~~SFAS~~not ~~No. 165,~~issue ~~“Subsequent~~new ~~Events”~~standards ~~(“FAS~~in ~~165”).~~the ~~FAS~~form ~~165 is intended to establish general standards~~ of ~~accounting~~Statements, ~~for~~FASB ~~and~~Staff ~~disclosure~~Positions ofor ~~events~~Emerging ~~that~~Issues ~~occur~~Task ~~after~~Force ~~the~~Abstracts. ~~balance~~Instead, ~~sheet~~it ~~date~~will ~~but~~issue ~~before~~Accounting ~~financial~~Standards ~~statements~~Updates ~~are~~which ~~issued~~will orserve ~~are available~~ to beupdate ~~issued. It requires disclosure of~~ the ~~date~~Codification, ~~through~~provide ~~which~~background aninformation ~~entity~~about ~~has~~the ~~evaluated~~guidance ~~subsequent~~and ~~events~~provide ~~and~~ the basis for conclusions ~~selecting~~on ~~that date, that is, whether that date represents~~ the ~~date~~changes ~~the financial statements were issued or were available~~ to bethe ~~issued~~Codification. ~~FAS 165 is effective for our second quarter ended June 30, 2009.~~

~~Note~~The 4Codification is not intended to change GAAP, but it will change the way GAAP is organized and presented. The Codification is effective for our third-quarter ~~Subsequent~~2009 ~~Events~~financial statements and the principal impact on our financial statements is limited to disclosures as all future references to authoritative accounting literature will be referenced in accordance with the Codification.

WeIn ~~have~~May ~~performed~~2009, anthe FASB issued SFAS No. 165, “Subsequent Events” (ASC Topic 855). This ~~evaluation~~guidance is intended to establish general standards of ~~subsequent~~accounting for and disclosures of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued. It requires disclosure of the date through ~~August 6,~~which ~~2009~~an entity has evaluated subsequent events and the basis for selecting this date, ~~which~~that is, whether this date represents the date the financial statements were issued or were available to be issued. This guidance is effective for our third quarter ended September 30, 2009.

Note 4 – Subsequent Events

We have performed an evaluation of subsequent events through October 30, 2009, which is the date the financial statements were issued.

Item 2.

XEROX CREDIT CORPORATION

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Because our liquidity 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 ~~June~~September 30, 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.

Results of Operations

Earned income from the Master Demand Note, which represents a demand loan for accumulated cash transfers to XC, was $11 million and $1615 million for the ~~second~~third quarters of 2009 and 2008, respectively, and $2031 million and $3045 million for the ~~six~~ nine months ended ~~June~~September 30, 2009 and 2008, respectively. The decreases in 2009 primarily relate to lower interest rates ~~and~~on athe ~~lower~~ Master Demand Note balance as compared to 2008 comparable periods.

Interest expense was $1 million and $23 million for the ~~second~~third quarters of 2009 and 2008, respectively, and $23 million and $5 8 million for the ~~six~~nine months ended ~~June~~ September 30, 2009 and 2008, respectively. The decreases relate to lower debt levels primarily as a result of ~~regularly~~ scheduled ~~payments~~repayments and debt maturities as well as our early redemption of $100 million of debt in the third quarter of 2008.

The effective income tax rate was 37.47% and 37.53% for the ~~second~~third quarters of 2009 and 2008 respectively, and 37.45% and 37.3% for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively, reflecting the U.S. federal statutory rate of 35.0% and net state income taxes.

Capital Resources and Liquidity

Net cash provided by operating activities was $1218 million and $1526 million for the ~~six~~nine months ended ~~June~~September 30, 2009 and 2008, respectively. The decrease primarily reflects lower net income.

Net cash used in investing activities was $1218 million ~~and $15 million~~ for the ~~six~~ nine months ended ~~June~~September 30, 2009 ~~and 2008~~, ~~respectively,~~ and represents net advances to Xerox. Net cash provided by investing activities was $74 million for the 2008 comparable period. 2009 net advances to Xerox consisted of additional loans to Xerox of $2031 million from interest on the Master Demand Note, net of $813 million of collections for the payment of taxes and interest. ~~2008~~Cash ~~net~~provided ~~advances~~by toinvesting ~~Xerox~~activities ~~consisted~~in of2008 ~~additional~~consisted ~~loans to Xerox~~ of $30100 million increase from ~~interest~~our collections on the ~~Master~~demand ~~Demand~~note ~~Note,~~used ~~net~~to ofrepay ~~$15~~debt, ~~million~~offset ofby ~~collections~~a ~~for~~reduction ~~the~~of ~~payment~~$26 million of ~~taxes~~net ~~and~~advances ~~interest~~to Xerox.

There was no cash provided by or used in financing activities for the ~~six~~nine months ended ~~June~~September 30, 2009. orNet cash used in financing activities was $100 million for the nine months ended September 30, 2008 and reflects the early redemption of a portion of our Medium Term Notes.

As of ~~June~~September 30, 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 ~~June~~September 30, 2009 will be sufficient to meet our remaining obligations as they are redeemed or mature.

Financial Risk Management

Given the nature of our operations, our exposures are limited to the fixed interest rate exposures embedded in the remaining unpaid debt and will further decrease over time as debt is repaid. 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 ~~JUNE~~SEPTEMBER 30, 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~~ XEROX CORPORATION’S CAPITAL RESOURCES AND LIQUIDITY. ACCORDINGLY, THESE EXCERPTS SHOULD BE READ IN THE CONTEXT OF THE XEROX CORPORATION CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, WHICH ARE INCLUDED IN XEROX CORPORATION’S QUARTERLY REPORT ON ON FORM 10-Q FOR THE QUARTER ENDED ~~JUNE~~SEPTEMBER 30, 2009 FILED SEPARATELY WITH THE SEC.

Capital Resources and Liquidity

The following table summarizes our cash and cash equivalents:

	Six MonthsEnded June 30,
	Nine MonthsEnded September 30,
(in millions)	2009			2008			Change
Net cash provided by operating activities	$	~~631~~1,241		$	~~494~~754		$	~~137~~487
Net cash used in investing activities		(~~243~~274	)		(~~350~~706	)		~~107~~432
Net cash used in financing activities		(~~400~~1,054	)		(~~404~~251	)		4(803	)
Effect of exchange rate changes on cash and cash equivalents		417			4(23	)		—40
Decrease in cash and cash equivalents		(870	)		(~~256~~226	)		~~248~~156
Cash and cash equivalents at beginning of period		1,229			1,099			130
Cash and cash equivalents at end of period	$	1,~~221~~159		$	~~843~~873		$	~~378~~286

Cash Flows from Operating Activities

Net cash provided by operating activities was $~~631~~1,241 million for the ~~six~~nine months ended ~~June~~September 30, 2009. The $~~137~~487 million increase in cash from the ~~six~~nine months ended ~~June~~September 30, 2008 was primarily due to to the following:

• $~~327~~438 million decrease in pre-tax income before litigation and restructuring.

• $~~373~~438 million increase from accounts receivables, reflecting lower revenue, improved collections and benefits from the ~~sale~~sales of accounts receivables.

• $~~247~~334 million increase as a result of lower inventory levels, reflecting focused supply chain actions in light of lower sales volume.

• $34174 million increase due to lower ~~placements~~contributions ofto ~~equipment~~our ondefined ~~operating~~pension ~~leases~~benefit ~~reflecting lower install activity~~plans.

• $1157 million increase due to ~~higher~~lower ~~net~~placements ~~run-off~~ of ~~finance~~equipment ~~receivables~~on operating leases reflecting lower install activity.

• $~~130~~28 million ~~decrease~~increase due to ~~lower~~higher ~~accounts~~net ~~payable~~run-off ~~and accrued compensation primarily related to lower purchases and the timing~~ of ~~payments~~finance ~~to suppliers~~receivables.

• $~~106~~139 million decrease due to higher restructuring payments associated with previously reported actions.

Cash Flows from Investing Activities

Net cash used in investing activities was $~~243~~274 million for the ~~six~~nine months ended ~~June~~September 30, 2009. The $~~107~~432 million increase in cash from the ~~six~~nine months ended ~~June~~September 30, 2008 was primarily due to the following:

• $~~134~~401 million increase due to lower escrow and other restricted investments. 2008 reflects the funding of the escrow account for the Carlson litigation settlement.

• $55100 million increase due to lower capital expenditures (including internal use software), reflecting focused management onof our capital requirements.

•10 ~~$27 million decrease due to lower cash receipts from asset sales.~~

•

$56 million decrease primarily due to the absence of insurance proceeds for the Carlson litigation settlement received in 2008.

•

$21 million decrease due to lower cash receipts from asset sales.

Cash Flows from Financing Activities

Net cash used in financing activities was $~~400~~1,054 million for the ~~six~~ nine months ended ~~June~~September 30, 2009. The $4803 million ~~increase~~decrease in cash from the ~~six~~nine months ended ~~June~~September 30, 2008 was primarily due to the following:

• $~~712~~1,771 million ~~increase~~decrease due to lower net debt proceeds. 2009 reflects the ~~absence~~repayment of ~~purchases~~the ~~under~~2009 Senior Notes of $879 million, net payments of $448 million for two Zero Coupon Notes, net payments of $246 million on the ~~Company’s~~Credit ~~share~~Facility, ~~repurchase~~and ~~program~~net payments of $48 million primarily for foreign short-term borrowings. These payments were partially offset by the issuance of $750 million in Senior Notes. 2008 reflects the issuance of $1.4 billion in Senior Notes and $250 million in Zero Coupon Notes, and net payments of $352 million on the Credit Facility and $398 million on other debt.

• $~~107~~804 million increase ~~primarily~~ due to ~~lower~~the ~~debt~~absence ~~payments~~of onpurchases ~~secured~~under ~~financings~~the Company’s share repurchase program.

• $~~837~~142 million ~~decrease~~increase primarily due to lower ~~net proceeds on unsecured~~ debt. ~~2009 reflects the repayment of the 2009 Senior Notes of $879 million, net~~ payments ~~of $96 million~~ on ~~the~~secured ~~Credit Facility and $41 million primarily for foreign short-term borrowings~~financings. These payments were partially offset by proceeds from the issuance of $750 million in Senior Notes. 2008 reflects the issuance of $1.4 billion in Senior Notes, as well as, net payments of $550 million on the Credit Facility and net payments of $279 million on other debt.

•

$22 million increase due to the absence of repurchases related to stock-based compensation.

Customer Financing Activities

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

(in millions)	~~June~~September 30,2009		December 31,2008
Total Finance receivables, net (1)	$	7,~~041~~023	$	7,278
Equipment on operating leases, net		~~566~~550		594
Total Finance Assets, net	$	7,~~607~~573	$	7,872

(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.

The reduction of $~~265~~299 million in Total finance assets, net includes favorable currency of $~~109~~ 238 million.

The following summarizes our debt:

(in millions)	~~June~~September 30,2009			December 31,2008
Principal debt balance	$	7,~~885~~283		$	8,201
Less: Net unamortized discount		(6	)		(6	)
Net unamortized discount		(7	)		(6	)
Add: SFAS No. 133 fair value adjustments		158			189
SFAS No. 133 fair value adjustments (Topic ASC 815)		170			189
Total Debt		87,~~037~~446			8,384
Less: Current maturities and short-term debt		(1,~~342~~149	)		(1,610	)
Total Long-Term Debt	$	6,~~695~~297		$	6,774

Our lease contracts permit customers to pay for equipment over time rather than at the date of installation, ~~and~~ therefore, we maintain a certain level of debt, ~~which~~that we refer to as financing debt, to support our investment in these lease contracts, which are reflected in Total finance assets, net. For this financing aspect of our business, we maintain an assumed 7:1 leverage ratio of debt to equity as compared to our finance assets. Based on this leverage, the following represents the breakdown of total debt between financing debt and core debt:

(in millions)	~~June~~September 30,2009		December 31,2008
Financing debt (2)	$	6,~~655~~626	$	6,888
Core debt		~~1,382~~820		1,496
Total Debt	$	87,~~037~~446	$	8,384

1011

(2) Financing debt includes $6,~~161~~145 million and $6,368 million as of ~~June~~September 30, 2009 and December 31, 2008, respectively, of debt associated with Total finance receivables, net and is the basis for our calculation of “equipment financing interest” expense. The remainder of the financing debt is associated with Equipment on operating leases.

Sales of Accounts Receivables

During the ~~second~~third quarter 2009, we sold $~~373~~349 million of accounts receivables without recourse, as compared to $~~237~~373 million in the ~~first~~second quarter 2009 and $~~168~~146 million in the ~~second~~third quarter 2008. Fees associated with these sales were approximately $3 million, $23 million and $1 million, respectively. $~~358~~335 million of receivables sold to date remained uncollected by the third party purchasers as of ~~June~~September 30, 2009. We do not have any current or future liability for these non-recourse sales.

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~~ currently rated investment grade by all major rating agencies. As of ~~June~~September 30, 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

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. Our ability to maintain positive liquidity going forward depends on our ability to continue to generate cash from operations and access to financial markets, both of which are subject to general economic, financial, competitive, legislative, regulatory and other market factors that are beyond our control.

The following is a discussion of our liquidity position as of ~~June~~September 30, 2009:

• As of ~~June~~September 30, 2009, total cash and cash equivalents was $1.2 billion and our borrowing capacity under our Credit Facility was $~~1.8~~2 billion, reflecting ~~$150~~no ~~million~~ outstanding borrowings and no outstanding letters of credit. In addition, we currently have approximately $1.0 billion available under our secured borrowing arrangement with General Electric Capital Corporation (the “Loan Agreement”). This Agreement is in place through 2010, and has not been accessed in almost ~~three~~four ~~and a half~~ years.

• Cash flows from operations were $~~631~~1,241 million and $~~494~~754 million for the ~~six~~nine months ended ~~June~~September 30, 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 $1.57 billion.

•12 The first half of 2009 total debt decreased by $347 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
Q3 2009	$	475
Q4 2009		157
2010		969
2011		802
2012		1,145
2013		1,065
2014		819
2015		—
2016		951
2017		501
2018 and thereafter		1,001
Total	$	7,885

During the nine months ended September 30, 2009, total debt decreased by $938 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
Q4 2009	$	181
2010		967
2011		802
2012		1,100
2013		961
2014		819
2015		—
2016		951
2017		501
2018		1,001
2019 and thereafter		—

Total	$	7,283

Contractual Cash Obligations and Other Commercial Commitments and Contingencies

In ~~April~~July 2009, we signed ~~two~~a ~~seven~~five year ~~contracts~~contract with ~~Computer~~International ~~Sciences~~Business ~~Corporation~~Machines ~~(“CSC”)~~ for approximately $3970 million for ~~mainframe~~mid-range ~~application development~~applications ~~and maintenance services and $51 million for mainframe computing services~~ support in North America. This ~~These~~contract ~~contracts~~replaces ~~replace~~ the EDS ~~mainframe~~contract ~~applications,~~which ~~maintenance~~expires ~~and support and mainframe process contracts~~ in ~~North~~mid ~~America, which expire in June~~ 2010 ~~and December 2013, respectively~~.

In April 2009, we signed two seven year contracts with Computer Sciences Corporation (“CSC”) for approximately $40 million for mainframe application development and maintenance services and $51 million for mainframe computing services support in North America. These contracts replace the EDS mainframe applications, maintenance and support and mainframe process contracts in North America, which expire in June 2010 and December 2013, respectively.

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 expired in June 2009.

Financial Risk Management

We are exposed to market risk from changes in 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 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 are required to recognize all derivative instruments as either assets or liabilities at fair value in the balance sheet. As permitted, certain of these ~~derivative~~ 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 period at fair value and therefore do result in ~~some level of volatility. 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 markets during the~~ ~~period. The related cash flow impacts of all of our derivative activities are reflected as cash flows from operating activities.~~

By13 their nature, all derivative instruments involve, to varying degrees, elements of market and credit risk. 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~~ some ~~there~~level ~~is significant risk~~ of ~~loss~~volatility. inThe ~~the~~level ~~event~~ of ~~non-performance~~volatility bywill ~~the~~vary ~~counterparties associated~~ with ~~these~~ ~~instruments~~the ~~because~~type ~~these~~and ~~transactions~~amount ~~are~~of ~~executed~~derivative ~~with~~hedges aoutstanding, ~~diversified~~as ~~group~~well ofas ~~major~~fluctuations ~~financial~~in ~~institutions.~~the ~~Further,~~currency ~~our~~and ~~policy~~interest israte tomarkets ~~deal~~during ~~with~~the period. ~~counterparties~~The ~~having~~related acash ~~minimum~~flow ~~investment~~impacts ~~grade~~of orall ~~better~~of ~~credit~~our ~~rating.~~derivative ~~Credit~~activities ~~risk~~are isreflected ~~managed through~~as ~~the~~cash ~~continuous~~flows ~~monitoring~~from ofoperating ~~exposures to such counterparties~~activities.

By their nature, all derivative instruments involve, to varying degrees, elements of market and credit risk. 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 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.

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 10 – Financial Instruments – for further discussion and information on our financial risk management strategies.

READER’S NOTE: THIS CONCLUDES THE DISCUSSION EXCERPTED DIRECTLY FROM XEROX CORPORATION’S QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED ~~JUNE~~ SEPTEMBER 30, 2009.

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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.

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PART II—OTHER INFORMATION

Item 1A.

Risk Factors

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

As of ~~June~~ September 30, 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’s 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 ~~June~~September 30, 2009, Xerox’s total Cash and cash equivalents was $1.2 billion, and its borrowing capacity under its Credit Facility was $~~1.8~~2 billion, reflecting no outstanding borrowings ~~of $150 million~~. Xerox also has funding available through a secured borrowing arrangement with General Electric Capital Corporation. 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.

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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.

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).

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.

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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: August 6, 2009		By:	/s/ John F. Rivera
	(Registrant)
			John F. Rivera
Date: October 30, 2009	BY:	/S/ JOHN F. RIVERA
			Vice President, Treasurer andChief Financial Officer
		John F. Rivera
		Vice President, Treasurer and
		Chief Financial Officer

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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.

		Incorporated by reference to Exhibit 3(a) to Registrant’s Annual Report on Form 10-K for the Year Ended December 31, 2004.

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 Rule13a-14(a) or Rule15d-14(a).

Exhibit 31	(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.

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