Xerox 2002 Annual Report Download - page 57

55
2002 2001 2000
Charges to reserve, all programs $(474) $(555) $(423)
Non-cash items:
Special termination benefits and
pension curtailment 59 21 –
Effects of foreign currency and
other non-cash charges 23 50 36
Cash payments for restructurings $(392) $(484) $(387)
Note 3 — Acquisitions
CPID Division of Tektronix, Inc.: In January 2000, we
and Fuji Xerox completed the acquisition of the Color
Printing and Imaging Division of Tektronix, Inc.
(“CPID”). CPID manufactures and sells color printers,
ink and related products, and supplies. The original
aggregate consideration paid of $925 in cash, includ-
ing $73 paid directly by Fuji Xerox, was subject to pur-
chase price adjustments pending the finalization of
net asset values. During 2001, we were reimbursed
$18 in cash upon finalization of these values which
was recorded as a reduction to Goodwill in the
accompanying Consolidated Balance Sheets. The
acquisition was accounted for in accordance with the
purchase method of accounting.
The excess of cash paid over the fair value of net
assets acquired was allocated to identifiable intangi-
ble assets and goodwill using a discounted cash flow
approach. The value of the identifiable intangible
assets included $27 for purchased in-process research
and development that was expensed in 2000. The
charge represented the fair-value of certain acquired
research and development projects that were deter-
mined not to have reached technological feasibility as
of the date of the acquisition, and was determined
based on a methodology that utilized the projected
after-tax cash flows of the products expected to result
from in-process research and development activities
and the stage of completion of the individual projects.
Other identifiable intangible assets acquired were
exclusive of intangible assets acquired by Fuji Xerox,
and included the installed customer base, the distribu-
tion network, the existing technology, the workforce
(which was transferred to goodwill upon adopting
SFAS No. 142) and trademarks. These identifiable
assets are included in Intangible assets, net in the
accompanying Consolidated Balance Sheets.
The other identifiable intangible assets acquired are
being amortized on a straight-line basis over the esti-
mated useful lives which range from 7 to 25 years.
During 2001, certain intangible asset useful lives were
revised. As a result of these revisions, we recorded an
additional $9 in amortization expense during 2001. The
goodwill recorded in connection with this transaction
was being amortized on a straight-line basis (over 25
years) through December 31, 2001. On January 1, 2002,
we adopted the provisions of SFAS No. 142 and the
amortization of goodwill was discontinued. Refer to
Note 1 for further discussion of the adoption of SFAS
No. 142.
In connection with this acquisition, we recorded
approximately $45 for anticipated costs associated
with exiting certain activities of the acquired opera-
tions. These activities included: (i) the consolidation
of duplicate distribution facilities; (ii) the rationaliza-
tion of the service organization and (iii) the exiting of
certain lines of the CPID business. The costs associat-
ed with these activities included inventory write-offs,
severance charges, contract cancellation costs and
fixed asset impairment charges. During 2001, we
revised our originally planned initiatives related to
the acquired European service organization and our
estimate of the costs to complete the exit from our
distribution facilities in Europe. These changes, along
with certain other changes, resulted in the reversal of
$9 of the originally recorded reserves, with a
corresponding reduction in goodwill.
Note 4 — Divestitures and Other Sales
Nigeria: In December 2002, we sold our remaining
investment in Nigeria for a nominal amount and
recognized a loss of $35, primarily representing
cumulative translation adjustment losses which were
previously unrealized.
Licensing Agreement: In September 2002, we signed
a license agreement with a third-party, related to a
nonexclusive license for the use of certain of our
existing patents. In October 2002, we received
proceeds of $50 and granted the license. We have no
continuing obligation or other commitments to the
third-party and recorded the income associated with
this transaction as revenue in Service, outsourcing
and rentals in the accompanying Consolidated
Statement of Income.
Katun Corporation: In July 2002, we sold our 22 per-
cent investment in Katun Corporation, a supplier of
aftermarket copier/printer parts and supplies, for net
proceeds of $67. This sale resulted in a pre-tax gain of
$12, which is included in Other expenses, net, in the
accompanying Consolidated Statement of Income.
After-tax, the sale was essentially break-even, as the
taxable basis of Katun was lower than our carrying
value on the sale date resulting in a high rate of
income tax.
Italy Leasing Business: In April 2002, we sold our
leasing business in Italy to a company now owned by
GE for $200 in cash plus the assumption of $20 of debt.
This sale is part of an agreement under which GE, as
successor, will provide ongoing, exclusive equipment
financing to our customers in Italy. The total pre-tax
loss on this transaction, which is included in Other
expenses, net, in the accompanying Consolidated