Xerox 2004 Annual Report Download - page 55

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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 $210, $271
and $408 for the years ended December 31, 2004, 2003
and 2002, 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:
2005 2006 2007 2008 Thereafter
$401 $219 $111 $45 $17
Total contingent rentals on operating leases,
consisting principally of usage charges in excess of
minimum contracted amounts, for the years ended
December 31, 2004, 2003 and 2002 amounted to $137,
$235 and $187, respectively.
Note 5 – Land, Buildings and
Equipment, Net
The components of land, buildings and equipment, net
at December 31, 2004 and 2003 were as follows:
Estimated
Useful Lives
(Years) 2004 2003
Land $53$56
Buildings and building
equipment 25 to 50 1,167 1,194
Leasehold improvements Lease term 313 383
Plant machinery 5to 12 1,667 1,588
Office furniture and
equipment 3 to 15 1,072 1,081
Other 4 to 20 74 74
Construction in progress 96 114
Subtotal 4,442 4,490
Less: Accumulated
depreciation (2,683) (2,663)
Land, buildings and
equipment, net $ 1,759 $ 1,827
Depreciation expense was $305, $299 and $341 for
the years ended December 31, 2004, 2003 and 2002,
respectively. We lease certain land, buildings and
equipment, substantially all of which are accounted for
as operating leases. Total rent expense under operating
leases for the years ended December 31, 2004, 2003 and
2002 amounted to $316, $287, and $299, respectively.
Future minimum operating lease commitments that
have remaining non-cancelable lease terms in excess
of one year at December 31, 2004 follow:
2005 2006 2007 2008 2009 Thereafter
$222 $181 $143 $109 $94 $256
In certain circumstances, we sublease space not
currently required in operations. Future minimum
sublease income under leases with non-cancelable
terms in excess of one year amounted to $17 at
December 31, 2004.
We have an information technology contract with
Electronic Data Systems Corp. (“EDS”) through June
30, 2009. Services to be provided under this contract
include support of global mainframe system process-
ing, application maintenance, desktop and helpdesk
support, voice and data network management and
server management. There are no minimum payments
due EDSunder the contract. Payments to EDS, which
are recorded in selling, administrativeand general
expenses, were $328, $340, and $385 for the years
ended December 31, 2004, 2003and 2002, respectively.
In December 2003, STHQ Realty LLC was formed
to finance the acquisition of the Company’s headquar-
ters in Stamford, Connecticut. While the assets and
liabilities of this special purpose entity are included in
the Company’s Consolidated Financial Statements,
STHQRealty LLCis a bankruptcy remote separate
legal entity. As a result, its assets of $42 at December
31, 2004, are not available to satisfy the debts and
other obligations of the Company.
Note 6 – Investments in Affiliates,
at Equity
Investments in corporate joint ventures and other
companies in which wegenerally have a 20 to 50 per-
cent ownership interest at December 31, 2004 and
2003 were as follows:
2004 2003
Fuji Xerox (1) $772 $556
Investment in subsidiary trusts
issuing preferred securities 39 69
Other investments 34 19
Investments in affiliates, at equity $845 $644
(1) Fuji Xerox is headquartered in Tokyo and operates in Japan and other
areas of the Pacific Rim, Australia and New Zealand. Our investment in
Fuji Xerox of $772 at December 31, 2004, differs from our implied 25 per-
cent interest in the underlying net assets, or $840, due primarily to our
deferral of gains resulting from sales of assets by us to Fuji Xerox, par-
tially offset by goodwill related to the Fuji Xerox investment established
at the time we acquired our remaining 20 percent of Xerox Limited from
The Rank Group (plc). Such gains would only be realizable if Fuji Xerox
sold a portion of the assets we previously sold to it or if we were to sell
aportion of our ownership interest in Fuji Xerox.