Xerox 2008 Annual Report Download - page 62

Notes to the Consolidated
Financial Statements
(in millions, except per share data and
unless otherwise indicated)
The following is a reconciliation of segment profit to pre-tax income:
Year Ended December 31,
2008 2007 2006
Total Segment profit $1,291 $1,588 $1,390
Reconciling items:
Restructuring and asset impairment charges (429) 6 (385)
Restructuring charges of Fuji Xerox (16) (30) —
Litigation matters(1) (774) — (68)
Equipment write-off (39) ——
Equity in net income of unconsolidated affiliates (113) (97) (114)
Other (34) (29) (15)
Pre-tax (loss) income $ (114) $1,438 $ 808
(1) The 2008 provision for litigation represents $670 for the Carlson v. Xerox Corporation court approved settlement, as well as provisions for other litigation matters including $36 for the probable
loss related to the Brazil labor related contingencies. The 2006 provision for litigation represents $68 related to probable losses on Brazilian labor-related contingencies. Refer to Note 16 –
Contingencies for further discussion.
Geographic area data is based upon the location of the subsidiary reporting the revenue or long-lived assets and is as follows:
Revenues Long-Lived Assets(1)
2008 2007 2006 2008 2007 2006
United States $ 9,122 $ 9,078 $ 8,406 $1,386 $1,375 $1,309
Europe 6,011 5,888 5,378 680 746 572
Other Areas 2,475 2,262 2,111 248 341 356
Total $17,608 $17,228 $15,895 $2,314 $2,462 $2,237
(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
Veenman B.V.
In June 2008, we acquired Veenman B.V. (“Veenman”), expanding
our reach into the small and mid-sized business market in Europe,
for approximately $69 (€44 million) in cash, including transaction
costs. Veenman is the Netherlands’ leading independent distributor
of office printers, copiers and multifunction devices serving small
and mid-size businesses. The operating results of Veenman are not
material to our financial statements, and are included within our
Office segment from the date of acquisition. The purchase price
was primarily allocated to intangible assets and goodwill based on
third-party valuations and management’s estimates.
Global Imaging Systems, Inc.
In 2007, we acquired GIS, a provider of office technology for small
and mid-size businesses in the United States. 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. In addition, in connection with the closing, we also repaid
$200 of GIS’s then outstanding bank debt. The results of
operations for GIS are included in our Consolidated Statements of
Income as of May 9, 2007. 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 of $1,335 and intangible assets of
$363 were recorded in connection with the acquisition based on
third-party valuations and management’s estimates for those
acquired intangible assets. The majority of the goodwill is not
deductible for tax purposes and the primary elements that
generated goodwill are the value of the acquired assembled
workforce, specialized processes and procedures and operating
synergies, none of which qualify as a separate intangible asset.
Intangible assets included customer relationships of $189 with a
12 year weighted average useful life and tradenames of $174 with
a 20 year weighted average useful life.
The unaudited pro forma results presented below include the
effects of the GIS acquisition as if it had been consummated as of
January 1, 2006. The pro forma results include the amortization
associated with the estimated value of acquired intangible assets
and interest expense associated with debt used to fund the
acquisition. However, pro forma results do not include any
anticipated synergies or other expected benefits of the acquisition.
60 Xerox 2008 Annual Report