Xerox 2003 Annual Report Download - page 53

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• Turnaround Program: The Turnaround Program was
initiated in October 2000 to reduce costs, improve
operations, transition customer equipment financing
to third-party vendors and sell certain assets. This pro-
gram included the outsourcing of certain Office oper-
ating segment manufacturing to Flextronics, as
discussed in Note 3. Overall, approximately 11,200
positions were eliminated under this program.
• SOHO Disengagement: In 2001, we commenced a
separate restructuring program associated with the
disengagement from our worldwide small office/home
office (“SOHO”) business. The program included pro-
visions for the elimination of approximately 1,200
positions worldwide by the end of 2001, the closing of
facilities and the write down of certain assets to net
realizable value.
• March 2000/April 1998 Programs: These programs
were likewise initiated to reduce overall costs and
included reductions in workforce as well as the consol-
idation of facilities on a worldwide basis. Overall,
approximately 14,200 positions were eliminated
under these programs.
Reversals of prior period charges were recorded
for these programs during the three-year period
ended December 31, 2003 primarily as a result of
changes in estimates associated with employee
severance and related costs.
Note 3 – Divestitures and Other Sales
During the three years ended December 31, 2003, the
following transactions occurred:
Xerox Engineering Systems: In the second quarter 2003,
we sold our XES subsidiaries in France and Germany
for a nominal amount and recognized a loss of $12.
South Africa: In the second quarter 2003, we sold our
interests in our South African affiliate for proceeds of
$29 and recognized a gain of $4.
Nigeria: In December 2002, we sold our remaining
investment in Nigeria for a nominal amount and rec-
ognized a loss of $35, primarily representing cumula-
tive 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 exist-
ing 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 transac-
tion 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 Statements 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 leas-
ing 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, provides 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
Statements of Income, was $27 primarily related to
recognition of cumulative translation adjustment loss-
es and final sale contingency settlements.
Prudential Insurance Company Common Stock: In the
first quarter of 2002, we sold common stock of
Prudential Insurance Company associated with that
company’s demutualization. In connection with this
sale, we recognized a pre-tax gain of $19 that is includ-
ed in Other Expenses, net, in the accompanying
Consolidated Statements of Income.
Delphax: In December 2001, we sold Delphax Systems
and Delphax Systems, Inc. (“Delphax”) to Check
Technology Canada LTD and Check Technology
Corporation for $16. The transaction was essentially
break-even. Delphax designs, manufactures and sup-
plies high-speed electron beam imaging digital print-
ing systems and related parts, supplies and services.
Nordic Leasing Business: In April 2001, we sold our
leasing businesses in four Nordic countries to a com-
pany now owned by GE, for $352 in cash and retained
interests in certain finance receivables for total pro-
ceeds of approximately $370 which approximated
book value. These sales are part of an agreement
under which that company will provide ongoing,
exclusive equipment financing to our customers in
those countries.
Fuji Xerox Interest: In March 2001, we sold half of our
ownership interest in Fuji Xerox to Fuji Photo Film Co.,
Ltd (“Fuji Film”) for $1.3 billion in cash. In connection
with the sale, we recorded a pre-tax gain of $773.
Under the agreement, Fuji Film’s ownership interest in
Fuji Xerox increased from 50 percent to 75 percent.
Our ownership interest decreased to 25 percent and
we retain significant rights as a minority shareholder.
We have product distribution and technology agree-