Xerox 2004 Annual Report Download - page 37

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35
Contractual Cash Obligations and Other
Commercial Commitments and Contingencies:
At December 31, 2004, we had the following contractual
cash obligations and other commercial commitments
and contingencies ($ in millions):
Year 1 Years 2-3 Years 4-5 There-
2005 2006 2007 2008 2009 after
Long-term debt, including capital lease obligations (1) $ 3,074 $ 951 $1,366 $1,041 $ 959 $2,733
Minimum operating lease commitments(2) 222 181 143 109 94 256
Liabilities to subsidiary trusts issuing preferred securities (3) –88 – – – 629
Total contractual cash obligations (4) $3,296 $1,220 $1,509 $1,150 $1,053 $3,618
(1) Refer to Note 9 to our Consolidated Financial Statements for interest payments by us as well as for additional information related to long-term debt
(amounts above include principal portion only).
(2) Refer to Note 5 to our Consolidated Financial Statements for additional information related to minimum operating lease commitments.
(3) Refer to Note 10 to our Consolidated Financial Statements for interest payments by us as well as for additional information related to liabilities to subsidiary
trusts issuing preferred securities (amounts above include principal portion only).
(4) Certain long-term liabilities reflected on our balance sheet, such as unearned income, are not presented in this table because they do not require cash set-
tlement in the future.
Other Commercial Commitments
and Contingencies
Pension and Other Post-Retirement Benefit
Plans: Wesponsor pension and other post-retirement
benefit plans that require periodic cash contributions.
Our 2004 cash fundings for these plans were $409 mil-
lion for pensions and $104 million for other post-
retirement plans. Our anticipated cash fundings for
2005 are $114 million for pensions and $128 million
for other post-retirement plans. Cash contribution
requirements for our domestic tax qualified pension
plans are governed by the Employment Retirement
Income Security Act (ERISA) and the Internal
Revenue Code. Cash contribution requirements for
our international plans are subject to the applicable
regulations in each country. The expected contributions
for pensions for 2005include no expected contribu-
tions to the domestic tax qualified plans because these
plans have already exceeded the ERISA minimum
funding requirements for the plans’ 2004plan year
due to funding of approximately $210 million in 2004.
Our post-retirement plans are non-funded and are
almost entirely related to domestic operations. Cash
contributions are made each year to cover medical
claims costs incurred in that year.
Flextronics: In 2001, we outsourced certain manu-
facturing activities to Flextronics under a five-year
agreement. During 2004, wepurchased $874 million
of products from Flextronics. We anticipate that we
will purchase approximately $920 million of products
from Flextronics during 2005and expect this level to
be commensurate with our sales in the future.
Fuji Xerox: We had product purchases from Fuji
Xerox totaling $1.1 billion, $871 million, and $727 mil-
lion in 2004, 2003 and 2002, respectively. Our
purchase commitments with Fuji Xerox are in the
normal course of business and typically have a lead
time of three months. We anticipate that we will pur-
chase approximately $1.2 billion of products from Fuji
Xerox in 2005. Related party transactions with Fuji
Xerox are disclosed in Note 6 to the Consolidated
Financial Statements.
Other Purchase Commitments: We enter into
other purchase commitments with vendors in the
ordinary course of business. Our policy with respect to
all purchase commitments is to record losses, if any,
when theyare probable and reasonably estimable. We
currently do not have, nor do we anticipate, material
loss contracts.
EDS Contract: We have an information management
contract with Electronic Data Systems Corp. (“EDS”)
to provide services to us for global mainframe system
processing, application maintenance and support,
desktop services and helpdesk support, voice and data
network management, and server management. On
July 1, 2004, we extended the original ten-year
contract through June 30, 2009. Although there are no
minimum payments required under the contract, we
anticipate making the following payments to EDS over
the next five years (in millions): 2005 – $319; 2006 –
$309; 2007 – $298; 2008 – $290; 2009 – $141 (for six
months). Each framework has a process for estimat-
ing projected volumes. Pricing for the services (which
are comprised of global mainframe system processing,
application maintenance and enhancements, desktop
services and help desk support, voice and data man-