Xerox 2004 Annual Report Download - page 84

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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 included
in Other Expenses, net, in the accompanying
Consolidated Statements of Income.
Flextronics Manufacturing Outsourcings: In the
fourth quarter of 2001, we entered into purchase and
supply agreements with Flextronics, a global electronics
manufacturing services company. Under the agreements,
Flextronics purchased related inventory, property and
equipment. Pursuant to the purchase agreement, we
sold our operations in Toronto, Canada; Aguascalientes,
Mexico, Penang, Malaysia, Venray, The Netherlands
and Resende, Brazil to Flextronics in a series of
transactions, which were completed in 2002. In total,
approximately 4,100 Xeroxemployees in certain of
these operations transferred to Flextronics. Total
proceeds from the sales in 2002 and 2001 were $167,
plus the assumption of certain liabilities.
Under the supply agreement, Flextronics manu-
factures and supplies equipment and components,
including electronic components, for the Office seg-
ment of our business. This represents approximately
50 percent of our overall worldwide manufacturing
operations. The initial term of the Flextronics supply
agreement is through December 2006 subject to our
right to extend for two years. Thereafter it will auto-
matically be renewed for one-year periods, unless
either party elects to terminate the agreement. We
haveagreed to purchase from Flextronics most of our
requirements for certain products in specified product
families. We also must purchase certain electronic
components from Flextronics, so long as Flextronics
meets certain pricing requirements. Flextronics must
acquire inventory in anticipation of meeting our fore-
casted requirements and must maintain sufficient
manufacturing capacity to satisfy such forecasted
requirements. Under certain circumstances, we
may become obligated to repurchase inventory that
remains unused for more than 180 days, becomes
obsolete or upon termination of the supply agreement.
Our remaining manufacturing operations are primarily
located in Rochester, NY for our high end production
products and consumables and Wilsonville, OR for
consumable supplies and components for the Office
segment products.
Note 19 – Financial Statements of
Subsidiary Guarantors
The Senior Notes due 2009, 2010, 2011 and 2013
are jointly and severally guaranteed by Intelligent
Electronics, Inc. and Xerox International Joint
Marketing, Inc. (the “Guarantor Subsidiaries”),
each of which is wholly-owned by Xerox Corporation
(the “Parent Company”). The following supplemental
financial information sets forth, on a condensed con-
solidating basis, the balance sheets, statements of
income and statements of cash flows for the Parent
Company, the Guarantor Subsidiaries, the non-
guarantor subsidiaries and total consolidated Xerox
Corporation and subsidiaries as of December 31, 2004
and December 31, 2003 and for the years ended
December 31, 2004, 2003 and 2002.