Xerox 2002 Annual Report Download - page 66

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The following is a reconciliation of segment profit
to total company pre-tax income (loss):
Years ended December 31, 2002 2001 2000
Total segment profit $ 978 $ 368 $ 122
Unallocated items:
Restructuring and asset
impairment charges (670) (715) (475)
Gain on early extinguishment
of debt –63 –
Restructuring related inventory
write-down charges (2) (42) (84)
In-process research and
development charges –– (27)
Gains on sales of Fuji Xerox
interest and China operations –773 200
Allocated item:
Equity in net income of
unconsolidated affiliates (54) (53) (103)
Pre-tax income (loss) $ 252 $ 394 $(367)
Geographic area data follow:
Revenues Long-Lived Assets(1)
2002 2001 2000 2002 2001 2000
United States $ 9,897 $10,034 $10,706 $1,524 $1,880 $2,423
Europe 4,425 5,039 5,511 718 767 940
Other Areas 1,527 1,935 2,534 379 706 1,052
Total $15,849 $17,008 $18,751 $2,621 $3,353 $4,415
1 Long-lived assets are comprised of (i) Land, buildings and equipment, net, (ii) On lease equipment, net, and (iii) Internal and external-use capitalized software
costs, net.
Note 10 — Net Investment in
Discontinued Operations
Our net investment in discontinued operations is
included in the Consolidated Balance Sheets in Other
long-term assets and totaled $728 and $749 at
December 31, 2002 and 2001, respectively. Our net
investment is primarily related to the disengagement
from our former insurance holding company, Talegen
Holdings, Inc. (“Talegen”).
Reinsurance Obligation: Xerox Financial Services, Inc.
(“XFSI”), a wholly-owned subsidiary, continues to
provide aggregate excess of loss reinsurance cover-
age (the “Reinsurance Agreements”) to two of the for-
mer Talegen units, Crum and Forster Inc. (“C&F”) and
The Resolution Group, Inc. (“TRG”) through Ridge
Reinsurance Limited (“Ridge Re”), a wholly-owned
subsidiary of XFSI. The coverage limits for these two
remaining Reinsurance Agreements total $578, which
is exclusive of $234 in C&F coverage that Ridge Re
reinsured during the fourth quarter of 1998.
We, and XFSI, have guaranteed that Ridge Re will
meet all its financial obligations under the two remain-
ing Reinsurance Agreements. Although unlikely, XFSI
may be required, under certain circumstances, to
purchase, over time, additional redeemable preferred
shares of Ridge Re, up to a maximum of $301.
During 2001, we replaced $660 of letters of credit,
which supported Ridge Re ceded reinsurance obliga-
tions, with trusts which included the then existing
Ridge Re investment portfolio of approximately $405
plus $255 in cash. During 2002, Ridge Re repaid $20 of
this cash to us and expects to repay the remaining
$235 during 2003 at the time of the expected novation
of the C&F reinsurance contract to another insurance
company. These trusts are required to provide securi-
ty with respect to aggregate excess of loss
reinsurance obligations under the two remaining
Reinsurance Agreements. At December 31, 2002 and
2001, the balance of the investments in the trusts,
consisting of U.S. government, government agency
and high quality corporate bonds, was $759 and $684,
respectively.
Our remaining net investment in Ridge Re was
$325 and $319 at December 31, 2002 and 2001,
respectively. Based on Ridge Re’s current projections
of investment returns and reinsurance payment obli-
gations, we expect to fully recover our remaining
investment. The projected reinsurance payments are
based on actuarial estimates.