Xerox 2002 Annual Report Download - page 89

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Note 19 — Financial Statements of
Subsidiary Guarantors
As indicated in Note 11, in January 2002, we completed
an unregistered offering in the U.S. ($600) and Europe
(225) of 9.75 percent senior notes (the “Senior
Notes”) due in 2009.
The Senior Notes are guaranteed by certain of our
subsidiaries (the “Subsidiary Guarantees”), including
Palo Alto Research Center Incorporated, Talegen
Holdings, Inc., Xerox Credit Corporation, Xerox Export,
LLC, Xerox Finance, Inc., Xerox Financial Services, Inc.,
Xerox Imaging Systems, Inc., Xerox International Joint
Marketing, Inc., Xerox Latin-American Holdings, Inc.,
and Xerox Connect, Inc. (the “Guarantor Subsidiaries”).
The Subsidiary Guarantees provide that each
Guarantor Subsidiary will fully and unconditionally
guarantee the obligations of Xerox Corporation (“the
Parent Company”) under the Senior Notes on a joint
and several basis. Each Subsidiary Guarantor is whol-
ly-owned by the Parent Company. The following sup-
plemental financial information sets forth, on a
condensed consolidating basis, the balance sheets,
statements of income and statements of cash flows for
the Parent Company, the Guarantor Subsidiaries, the
Non-Guarantor Subsidiaries and total consolidated
Xerox Corporation and subsidiaries as of December 31,
2002 and 2001 and for the years ended December 31,
2002, 2001 and 2000.
87
Condensed Consolidating Statements of Income
For the Year Ended December 31, 2002
Parent Guarantor Non-Guarantor Total
Company Subsidiaries Subsidiaries Eliminations Company
Revenues
Sales $3,396 $ 62 $3,294 $ – $ 6,752
Service, outsourcing and rentals 4,589 71 3,437 – 8,097
Finance income 294 276 530 (100) 1,000
Intercompany revenues 327 29 484 (840) –
Total Revenues 8,606 438 7,745 (940) 15,849
Costs and Expenses
Cost of sales 2,019 50 2,282 (154) 4,197
Cost of service, outsourcing and rentals 2,507 51 1,986 (14) 4,530
Equipment financing interest 119 128 254 (100) 401
Intercompany cost of sales 294 3 379 (676) –
Research and development expenses 804 47 78 (12) 917
Selling, administrative and general expenses 2,607 47 1,783 – 4,437
Restructuring and asset impairment charges 95 1 574 – 670
Other expenses (income), net 255 (44) 234 – 445
Total Costs and Expenses 8,700 283 7,570 (956) 15,597
Income (Loss) before Income Taxes (Benefits),
Equity Income, Minorities’ Interests and
Cumulative Effect of Change in Accounting
Principle (94) 155 175 16 252
Income taxes (benefits) (17) 70 1 6 60
Income (Loss) before Equity Income, Minorities’
Interests and Cumulative Effect of Change
in Accounting Principle (77) 85 174 10 192
Equity in net income of unconsolidated affiliates (6) 12 53 (5) 54
Equity in net income of consolidated affiliates 237 – – (237) –
Minorities’ interests in earnings of subsidiaries – – – (92) (92)
Income (Loss) before Cumulative Effect of
Change in Accounting Principle 154 97 227 (324) 154
Cumulative effect of change in accounting
principle (63) – (62) 62 (63)
Net Income (Loss) $ 91 $ 97 $ 165 $(262) $ 91