Xerox 2007 Annual Report Download - page 94

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in millions, except per-share data and unless otherwise indicated)
The following is a reconciliation of segment profit to pre-tax income (in millions):
Years Ended December 31,
2007 2006 2005
Total Segment profit ................................................................ $1,588 $1,390 $1,461
Reconciling items:
Restructuring and asset impairment charges ....................................... 6 (385) (366)
Provisions for litigation matters(1) ................................................. – (68) (114)
Initial provision for WEEE Directive ................................................ – – (26)
Restructuring charges of Fuji Xerox ............................................... (30) – –
Hurricane Katrina adjustments (losses) ............................................ – 8 (15)
Other expenses, net ............................................................. (29) (23) (12)
Equity in net income of unconsolidated affiliates ................................... (97) (114) (98)
Pre-tax income ...................................................................... $1,438 $ 808 $ 830
(1) 2006 provision for litigation represents $68 related to probable losses on Brazilian labor-related contingencies. 2005
provision for litigation primarily includes $102 related to MPI arbitration panel ruling. Refer to Note 16 –
Contingencies for further discussion relating to the 2006 and 2005 annual periods.
Geographic area data is based upon the location of the subsidiary reporting the revenue or long lived assets and is
as follows (in millions):
Revenues Long-Lived Assets(1)
2007 2006 2005 2007 2006 2005
United States ......................................... $ 9,078 $ 8,406 $ 8,388 $1,375 $1,309 $1,386
Europe ............................................... 5,888 5,378 5,226 746 572 500
Other Areas .......................................... 2,262 2,111 2,087 341 356 386
Total ................................................ $17,228 $15,895 $15,701 $2,462 $2,237 $2,272
(1) Long-lived assets are comprised of (i) land, buildings and equipment, net, (ii) equipment on operating leases, net,
(iii) internal use software, net and (iv) capitalized software costs, net.
Note 3 – Acquisitions
Global Imaging Systems, Inc: In May 2007, we
acquired GIS, a provider of office technology for small and
mid-size businesses in the United States for cash
consideration of $29 per common share. The acquisition
of GIS expanded our access to the U.S. small and mid-size
business market. The aggregate purchase price was
approximately $1.5 billion, consisting of cash paid for
outstanding stock, vested employee stock options and
restricted stock and direct transaction costs. In addition, in
connection with the closing, we also repaid $200 of GIS’
outstanding bank debt. The results of operations for GIS
are included in our Consolidated Statements of Income as
of May 9, 2007, the effective date of acquisition. Refer to
Note 2 – Segment Reporting for a discussion of the
segment classification of GIS.
The total cost of the acquisition has been allocated to
the assets acquired and the liabilities assumed based on
their respective estimated fair values. Goodwill and other
intangibles recorded in connection with the acquisition
totaled $1.7 billion based on third-party valuations and
management’s estimates for those acquired intangible
assets. Aggregate amortization expense associated with
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