Xerox 2006 Annual Report Download - page 73

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
Condensed financial data of Fuji Xerox for the three calendar years ended December 31, 2006 was as follows (in
millions):
2006 2005 2004
Summary of Operations:
Revenues ................................................................ $9,859 $10,009 $9,450
Costs and expenses ........................................................ 9,119 9,406 8,595
Income before income taxes ................................................. 740 603 855
Income taxes ............................................................. 281 215 331
Minorities’ interests ........................................................ 5 8 18
Net income .............................................................. $ 454 $ 380 $ 506
Balance Sheet Data:
Assets:
Current assets ............................................................. $3,731 $ 3,454 $3,613
Long-term assets .......................................................... 4,184 4,168 4,606
Total Assets .............................................................. $7,915 $ 7,622 $8,219
Liabilities and Shareholders’ Equity:
Current liabilities .......................................................... $2,954 $ 2,991 $2,757
Long-term debt ........................................................... 685 434 616
Other long-term liabilities ................................................... 590 936 1,383
Minorities’ interests in equity of subsidiaries .................................... 21 17 104
Shareholders’ equity ....................................................... 3,665 3,244 3,359
Total Liabilities and Shareholders’ Equity .................................... $7,915 $ 7,622 $8,219
In 2006, 2005 and 2004, we received dividends of
$41, $38 and $50, respectively, which were reflected as a
reduction in our investment. Additionally, we have a
technology agreement with Fuji Xerox whereby we
receive royalty payments for their use of our Xerox brand
trademark, as well as, rights to access their patent
portfolio in exchange for access to our patent portfolio.
Effective April 2006, we renewed our technology
agreement with Fuji Xerox (the “2006 Technology
Agreement”). The 2006 Technology Agreement provides
that Fuji Xerox will pay us a royalty that is based on Fuji
Xerox’s revenue. The 2006 Technology Agreement will
not result in a material change to the royalty revenues we
receive from Fuji Xerox. In general, all other existing
agreements with respect to intellectual property between
the parties will remain in full force and effect. Therefore,
all technology licenses previously granted between the
parties will not be subject to the 2006 Technology
Agreement but will generally remain subject to the terms
of any such prior arrangements. The only exception is that
the licenses previously granted under the 1999
Technology Agreement will be converted into fully
paid-up and royalty free licenses.
In 2006, 2005 and 2004, we earned royalty revenues
under this agreement of $117, $123 and $119,
respectively, which are included in Service, outsourcing
and rental revenues in the Consolidated Statements of
Income. 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 commitments 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, 2006 were as follows (in millions):
2006 2005 2004
Sales .................... $ 168 $ 163 $ 166
Purchases ................ $1,677 $1,517 $1,135
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