Xerox 2006 Annual Report Download - page 72

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Depreciation expense was $277, $280 and $305 for the years ended December 31, 2006, 2005 and 2004,
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, 2006, 2005 and 2004 amounted to
$269, $267, and $316, respectively. Future minimum operating lease commitments that have initial or remaining
non-cancelable lease terms in excess of one year at December 31, 2006 were as follows:
2007 2008 2009 2010 2011 Thereafter
$ 189 $ 161 $ 124 $ 102 $ 84 $ 158
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 $30 at December 31,
2006.
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. There are no minimum payments due EDS
under the contract. Payments to EDS, which are primarily
recorded in selling, administrative and general expenses,
were $288, $305 and $328 for the years ended
December 31, 2006, 2005 and 2004, respectively.
In December 2006, we sold our Corporate
headquarters facility for $55 and recognized a gain of
$15. In connection with the sale, the secured mortgage on
the facility of $34 was defeased through the purchase of
treasury securities totaling $36. The difference of $2 was
recorded as a loss on extinguishment of debt. The gain on
the sale as well as the loss on extinguishment are included
in Other expenses, net within the Consolidated Statements
of Income. In connection with the sale, we entered into a
two-year lease agreement, which is cancelable upon 90
days notice. We intend to relocate our Corporate
headquarters facility within the surrounding area, when a
suitable replacement facility is identified.
Note 7 – Investments in Affiliates, at Equity
Investments in corporate joint ventures and other
companies in which we generally have a 20% to 50%
ownership interest at December 31, 2006 and 2005 were
as follows (in millions): 2006 2005
Fuji Xerox(1) ........................ $834 $725
All other equity investments ............ 40 57
Investments in affiliates, at equity ..... $874 $782
(1) Fuji Xerox is headquartered in Tokyo and operates
in Japan, China, Australia, New Zealand and other
areas of the Pacific Rim. Our investment in Fuji
Xerox of $834 at December 31, 2006, differs from
our implied 25% interest in the underlying net assets,
or $916, due primarily to our deferral of gains
resulting from sales of assets by us to Fuji Xerox,
partially offset by goodwill related to the Fuji Xerox
investment established at the time we acquired our
remaining 20% of Xerox Limited from The Rank
Group plc.
Our equity in net income of our unconsolidated
affiliates for the three years ended December 31, 2006
was as follows:
2006 2005 2004
Fuji Xerox .................... $107 $90 $134
Other investments .............. 7 8 17
Total ..................... $114 $98 $151
Equity in net income of Fuji Xerox is affected by
certain adjustments to reflect the deferral of profit
associated with intercompany sales. These adjustments
may result in recorded equity income that is different than
that implied by our 25% ownership interest.
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