Xerox 2003 Annual Report Download - page 56

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ables within the facility, which represented their
remaining undivided interest balance. No new receiv-
ables were purchased by the counterparty and we
have no further obligations as such facility has been
terminated. The Canadian accounts receivable facility
had undivided interests of $36 at December 31, 2001.
It was impacted by a downgrade in our credit rating in
February 2002, which led to a similar termination
event. The Canadian accounts receivable facility was
not renegotiated and the balance of the undivided
interests was fully settled through collections in the
first quarter of 2002.
Note 5 – Inventories and Equipment
on Operating Leases, Net
The components of inventories at December 31, 2003
and 2002 were as follows:
2003 2002
Finished goods $ 911 $ 970
Work in process 74 67
Raw materials 167 194
Total inventories $1,152 $1,231
Equipment on operating leases and similar
arrangements consists of our equipment rented to
customers and depreciated to estimated salvage value
at the end of the lease term. The transfer of equipment
on operating leases from our inventories is presented
in our Consolidated Statements of Cash Flows in the
operating activities section as a non-cash adjustment.
Equipment on operating leases and the related accu-
mulated depreciation at December 31, 2003 and 2002
were as follows:
2003 2002
Equipment on operating leases $ 1,795 $ 2,002
Less: Accumulated depreciation (1,431) (1,552)
Equipment on operating leases, net $ 364 $ 450
Depreciable lives generally vary from three to four
years consistent with our planned and historical usage
of the equipment subject to operating leases.
Depreciation and obsolescence expense was $271,
$408, and $657 for the years ended December 31,
2003, 2002 and 2001, respectively. Our equipment
operating lease terms vary, generally from 12 to 36
months. Scheduled minimum future rental revenues
on operating leases with original terms of one year or
longer are:
2004 2005 2006 2007 Thereafter
$471 $228 $120 $43 $22
Total contingent rentals on operating leases, con-
sisting principally of usage charges in excess of mini-
mum contracted amounts, for the years ended
December 31, 2003, 2002 and 2001 amounted to $235,
$187 and $235, respectively.
Note 6 – Land, Buildings and
Equipment, Net
The components of land, buildings and equipment,
net at December 31, 2003 and 2002 were as follows:
Estimated
Useful Lives
(Years) 2003 2002
Land $ 56 $ 54
Buildings and building
equipment 25 to 50 1,194 1,077
Leasehold improvements Lease term 383 412
Plant machinery 5 to 12 1,588 1,551
Office furniture and
equipment 3 to 15 1,081 1,057
Other 4 to 20 74 107
Construction in progress 114 129
Subtotal 4,490 4,387
Less: Accumulated
depreciation (2,663) (2,630)
Land, buildings and
equipment, net $ 1,827 $ 1,757
Depreciation expense was $299, $341, and $402 for
the years ended December 31, 2003, 2002 and 2001,
respectively. We lease certain land, buildings and
equipment, substantially all of which are accounted for
as operating leases. Total rent expense under operat-
ing leases for the years ended December 31, 2003,
2002 and 2001 amounted to $287, $299, and $332,
respectively. Future minimum operating lease commit-
ments that have remaining non-cancelable lease terms
in excess of one year at December 31, 2003 follow:
2004 2005 2006 2007 2008 Thereafter
$235 $190 $148 $118 $96 $383
In certain circumstances, we sublease space not
currently required in operations. Future minimum sub-
lease income under leases with non-cancelable terms
in excess of one year amounted to $45 at December
31, 2003.
In 2001, we extended our information technology
contract with Electronic Data Systems Corp. (“EDS”)
for five years through June 30, 2009. Services to be
provided under this contract include support of global
mainframe system processing, application mainte-
nance, desktop and helpdesk support, voice and data
network management and server management. There
are no minimum payments due EDS under the con-
tract. Payments to EDS, which are recorded in selling,
administrative and general expenses, were $340, $385,
and $445 for the years ended December 31, 2003, 2002
and 2001, respectively.