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Xerox Corporation
91
The 2005, 2004 and 2003 computation of diluted earnings per
share did not include the effects of 36 million, 38 million and
63 million stock options, respectively, because their respective
exercise prices were greater than the corresponding market value
per share of our common stock.
In 2003, the following potentially dilutive securities were not included
in the computation of diluted EPS because to do so would have been
anti-dilutive (in thousands of shares on weighted-average basis):
2003
Series C Mandatory Convertible Preferred Stock 43,656
Liability to subsidiary trust issuing
preferred securities – Trust II 113,426
Convertible subordinated debentures 1,992
Total 159,074
All such securities were dilutive or converted to common stock
in 2005 and 2004.
Note 21 – Divestitures and Other Sales
During the three years ended December 31, 2005, the following
significant divestitures occurred:
Integic: In March 2005, we completed the sale of our entire equity
interest in Integic Corporation (“Integic”) for $96 in cash, net of
transaction costs. The sale resulted in a pre-tax gain of $93
($58 after-tax). Prior to this transaction, our investment in Integic
was accounted for using the equity method and was included in
Investments in affiliates, at equity within our Consolidated Balance
Sheets. The pre-tax gain is classified within Other (income)
expenses, net in the accompanying Consolidated Statements
of Income.
ScanSoft: In April 2004, we completed the sale of our ownership
interest in ScanSoft, Inc. (“ScanSoft”) to affiliates of Warburg
Pincus for approximately $79 in cash, net of transaction costs.
Prior to the sale, we beneficially owned approximately 15% of
ScanSoft’s outstanding equity interests. The sale resulted in a
pre-tax gain of $38. Prior to this transaction, our investment in
ScanSoft was accounted for as an “available for sale” investment.
The gain is classified within Other (income) expenses, net in the
accompanying Consolidated Statements of Income.
ContentGuard: In March 2004, we sold all but 2% of our 75%
ownership interest in ContentGuard Inc, (“ContentGuard”) to
Microsoft Corporation and Time Warner Inc. for $66 in cash. The
sale resulted in a pre-tax gain of $109 as our investment reflected
the recognition of cumulative operating losses. The gain on
sale has been presented within the accompanying consolidated
statements of income considering the reporting requirements
related to discontinued operations of SFAS No. 144, “Accounting
for the Impairment or Disposal of Long-Lived Assets.” The
revenues, operating results and net assets of ContentGuard were
immaterial for all periods presented. ContentGuard, which was
originally created out of research developed at the Xerox Palo
Alto Research Center (“PARC”), licenses intellectual property and
technologies related to digital rights management. During 2005,
we sold our remaining interest in ContentGuard.
Xerox Engineering Systems: In the second quarter of 2003,
we sold our Xerox Engineering Systems (“XES”) subsidiaries
in France and Germany for a nominal amount and recognized
aloss of $12.
Note 22 – Financial Statements of
Subsidiary Guarantors
The Senior Notes due 2009, 2010, 2011 and 2013 are
guaranteed by Xerox International Joint Marketing, Inc. (“XIJM”)
(the “Guarantor Subsidiary”), which is wholly owned by Xerox
Corporation (the “Parent Company”). Effective December 31,
2005, one of the prior guarantors, Intelligent Electronics, Inc.,
was merged into the Parent Company based on an internal
reorganization. This resulted in a retroactive restatement of the
condensed consolidating financial information to reflect XIJM
as the sole guarantor subsidiary as of December 31, 2005. The
following supplemental financial information sets forth, on a con-
densed consolidating basis, statements of income, the balance
sheets and statements of cash flows for the Parent Company,
the Guarantor Subsidiary,the non-guarantor subsidiaries and
total consolidated Xerox Corporation and subsidiaries for the
years ended December 31, 2005, 2004 and 2003 and as of
December 31, 2005 and December 31, 2004.
Xerox Annual Report 2005