Xerox 2009 Annual Report Download - page 61

59Xerox 2009 Annual Report
Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
Other Transactions with Fuji Xerox
We receive dividends from Fuji Xerox which are 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. These payments
are included in Service, outsourcing and rental revenues in the Con-
solidated 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 terms the Company believes to be conducted at arm’s
length. Our purchase commitments with Fuji Xerox are in the normal
course of business and typically have a lead time of three months. In
addition, we pay Fuji Xerox and they pay us for unique research and
development costs.
Other transactions with Fuji Xerox for the three years ended December
31, 2009 were as follows:
2009 2008 2007
Dividends received from Fuji Xerox $ 10 $ 56 $ 37
Royalty revenue earned 106 112 108
Inventory purchases
from Fuji Xerox 1,590 2,150 1,946
Inventory sales to Fuji Xerox 133 162 186
R&D payments received
from Fuji Xerox 3 5 3
R&D payments paid to Fuji Xerox 33 34 30
As of December 31, 2009 and 2008, amounts due to Fuji Xerox were
$114 and $194, respectively.
Fuji Xerox
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 $998 at December 31, 2009 differs from
our implied 25% interest in the underlying net assets, or $1,108, 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.
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. Equity income for
2009 and 2008 includes after-tax restructuring charges of $46 and
$16, respectively, primarily reflecting employee-related costs as
part of Fuji Xerox’s continued cost-reduction actions to improve its
competitive position.
Yen/U.S. Dollar exchange rates used to translate are as follows:
Exchange Basis 2009 2008 2007
Summary of Weighted
Operations Average Rate 93.51 103.31 117.53
Balance Sheet Year-End Rate 92.46 90.28 112.55
Condensed financial data of Fuji Xerox for the three calendar years
ended December 31, 2009 was as follows:
2009 2008 2007
Summary of Operations
Revenues $ 9,998 $ 11,190 $ 10,218
Costs and expenses 9,781 10,451 9,565
Income before income taxes 217 739 653
Income tax expense 67 287 252
Net Income $ 150 $ 452 $ 401
Less: Net income attributable
to noncontrolling interests 1 7 6
Net Income Attributable
to Fuji Xerox $ 149 $ 445 $ 395
Balance Sheet
Assets:
Current assets $ 4,111 $ 4,734 $ 4,242
Long-term assets 5,457 5,470 4,639
Total Assets $ 9,568 $ 10,204 $ 8,881
Liabilities and Equity:
Current liabilities $ 2,643 $ 3,534 $ 3,322
Long-term debt 1,368 996 900
Other long-term liabilities 1,104 1,095 746
Fuji Xerox Shareholders’ equity 4,434 4,556 3,888
Noncontrolling interests 19 23 25
Total Liabilities and Equity $ 9,568 $ 10,204 $ 8,881