Xerox 2005 Annual Report Download - page 69

Xerox Corporation
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Note 5 – Inventories and Equipment on
Operating Leases, Net
Inventories at December 31, 2005 and 2004 were as follows
(in millions):
2005 2004
Finished goods $ 956 $ 895
Work-in-process 99 65
Raw materials 146 183
Total Inventories $ 1,201 $ 1,143
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 from our inventories to equipment
subject to an operating lease is presented in our Consolidated
Statements of Cash Flows in the operating activities section as a
non-cash adjustment. We recorded $56, $73 and $78 in inventory
write-down charges for the years ended December 31, 2005,
2004 and 2003, respectively. Equipment on operating leases
and the related accumulated depreciation at December 31, 2005
and 2004 were as follows (in millions):
2005 2004
Equipment on operating leases $ 1,262 $ 1,649
Less: Accumulated depreciation (831) (1,251)
Equipment on operating leases, net $ 431 $ 398
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
$205, $210 and $271 for the years ended December 31, 2005,
2004 and 2003, respectively.Our equipment operating lease
terms vary, generally from 12 to 36 months. Scheduled minimum
futurerental revenues on operating leases with original terms of
one year or longer are(in millions):
2006 2007 2008 2009 2010 Thereafter
$386 $212 $130 $60 $27 $4
Total contingent rentals on operating leases, consisting principally
of usage charges in excess of minimum contracted amounts, for
the years ended December 31, 2005, 2004 and 2003 amounted
to $136, $137 and $235, respectively.
Note 6 – Land, Buildings and
Equipment, Net
Land, buildings and equipment, net at December 31, 2005 and
2004 were as follows (in millions):
Estimated
Useful Lives
(Years) 2005 2004
Land $ 51 $ 53
Buildings and building
equipment 25 to 50 1,163 1,167
Leasehold improvements Varies 326 313
Plant machinery 5 to 12 1,637 1,667
Office furniture and equipment 3 to 15 967 1,072
Other 4 to 20 76 74
Construction in progress 83 96
Subtotal 4,303 4,442
Less: Accumulated depreciation (2,676) (2,683)
Land, buildings and equipment, net $ 1,627 $ 1,759
Depreciation expense was $280, $305 and $299 for the years
ended December 31, 2005, 2004 and 2003, 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, 2005,
2004 and 2003 amounted to $267, $316, and $287, respec-
tively. Future minimum operating lease commitments that have
remaining non-cancelable lease terms in excess of one year at
December 31, 2005 were as follows (in millions):
2006 2007 2008 2009 2010 Thereafter
$197 $165 $124 $102 $90 $197
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 $14 at December 31, 2005.
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 processing, application maintenance, desktop
and helpdesk support, voice and data network management
and server management. Thereareno minimum payments due
EDS under the contract. Payments to EDS, which are primarily
recorded in selling, administrative and general expenses, were
$305, $328 and $340 for the years ended December 31, 2005,
2004 and 2003, respectively.
Xerox Annual Report 2005