Xerox 2004 Annual Report Download - page 56

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Our equity in net income of our unconsolidated
affiliates for the three years ended December 31, 2004
was as follows:
2004 2003 2002
Fuji Xerox $134 $41 $37
Other investments 17 17 17
Total $151 $58 $54
Equity income for 2004 included $38 related to
our share of a pension settlement gain recorded by
Fuji Xerox due to a non-recurring opportunity given to
Japanese companies by the Japanese government in
accordance with the Japan Welfare Pension Insurance
Law. This law allowed Japanese companies to transfer
aportion of their pension obligations to the Japanese
government. Fuji Xerox completed this transfer and
recognized a corresponding settlement gain in 2004.
Equity in net income of Fuji Xerox is affected by
certain adjustments to reflect the deferral of profit
associated with intercompanysales. These adjustments
mayresult in recorded equity income that is different
than that implied by our 25 percent ownership interest.
Condensed financial data of Fuji Xeroxas of and
for the three calendar years ended December 31, 2004
follow:
2004 2003 2002
Summary of Operations:
Revenues $9,461 $ 8,430 $7,539
Costs and expenses 8,606 8,011 7,181
Income before income taxes 855 419 358
Income taxes 331 194 134
Minorities’ interests 18 34 36
Net income $ 506 $ 191 $ 188
Balance Sheet Data:
Assets:
Current assets $3,613 $ 3,273 $ 2,976
Long-term assets 4,606 4,766 3,862
Total assets $8,219 $ 8,039 $6,838
Liabilities and
Shareholders’ Equity:
Current liabilities $ 2,757 $ 2,594 $ 2,152
Long-term debt 616 443 868
Other long-term liabilities 1,383 2,391 1,084
Minorities’ interests in
equity of subsidiaries 104 118 227
Shareholders’ equity 3,359 2,493 2,507
Total liabilities and
shareholders’ equity $8,219 $ 8,039 $6,838
We have a technology agreement with Fuji Xerox
whereby we receive royalty payments and rights to
access their patent portfolio in exchange for access
to our patent portfolio. In 2004, 2003 and 2002, we
earned royalty revenues under this agreement of $119,
$110 and $99, respectively. Additionally, in 2004, 2003
and 2002, we received dividends of $50, $20 and $29,
respectively. We also have arrangements with Fuji
Xerox whereby we purchase inventory from and sell
inventory to Fuji Xerox. Pricing of the transactions
under these arrangements is based upon negotiations
conducted at arm’s length. Certain of these inventory
purchases and sales are the result of mutual research
and development arrangements. Our purchase com-
mitments with Fuji Xerox are in the normal course of
business and typically have a lead time of three
months. Purchases from and sales to Fuji Xerox for the
three years ended December 31, 2004 were as follows:
2004 2003 2002
Sales $143 $ 129 $113
Purchases $1,135 $871 $727
In addition to the payments described above, in
2004, 2003 and 2002, we paid Fuji Xerox $27, $33 and
$20, respectively, and in 2004, 2003 and 2002 Fuji
Xerox paid us $9, $9 and $10, respectively, for unique
research and development. As of December 31, 2004
and 2003, amounts due to Fuji Xerox were $155 and
$111, respectively.
Note 7 – Restructuring Programs
Wehave engaged in a series of restructuring programs
related to downsizing our employee base, exiting cer-
tain activities, outsourcing certain internal functions
and engaging in other actions designed to reduce our
cost structure and improve productivity. Management
continues to evaluate the business and, therefore,
there maybe supplemental provisions for new plan
initiatives as well as changes in estimates to amounts
previously recorded, as payments are made or actions
are completed. Asset impairment charges were also
incurred in connection with these restructuring
actions for those assets made obsolete or redundant as
aresult of these programs. The restructuring and asset
impairment charges in the Consolidated Statements of
Income totaled $86, $176 and $670 in 2004, 2003 and
2002, respectively. Detailed information related to