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60 Xerox 2009 Annual Report
Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
Note 8 – Goodwill and Intangible Assets, Net
Goodwill
The following table presents the changes in the carrying amount
of goodwill, by reportable segment, for the three years ended
December 31, 2009:
Production Office Other Total
Balance at December 31, 2006(1) $ 892 $ 986 $ 146 $ 2,024
Foreign currency translation 21 17 — 38
Acquisition of GIS — 1,218 105 1,323
Acquisition of Advectis, Inc. — — 26 26
GIS acquisitions — 30 3 33
Other — — 4 4
Balance at December 31, 2007 $ 913 $ 2,251 $ 284 $ 3,448
Foreign currency translation (233) (161) (1) (395)
Acquisition of Veenman B.V. — 44 — 44
GIS acquisitions — 73 — 73
Purchase price allocation adjustment – GIS(2) — 120 (108) 12
Balance at December 31, 2008 $ 680 $ 2,327 $ 175 $ 3,182
Foreign currency translation 71 50 1 122
GIS acquisitions — 118 — 118
Balance at December 31, 2009 $ 751 $ 2,495 $ 176 $ 3,422
(1) Includes adjustment of $110 from the Other segment to the Office segment related to the goodwill associated with our 1998 acquisition of XL Connect Solutions, Inc.
(2) In 2008, we finalized the GIS purchase price allocation. As a result, the $108 of goodwill reflected in our Other segment in 2007 was reallocated to our Office segment.
This adjustment aligned goodwill to the reporting unit benefiting from the synergies of the purchase.
Intangible Assets, Net
Intangible assets primarily relate to the Office operating segment. Intangible
assets were comprised of the following as of December 31, 2009 and 2008:
December 31, 2009 December 31, 2008
Weighted
Average Gross Gross
Amortization Carrying Accumulated Net Carrying Accumulated Net
Period Amount Amortization Amount Amount Amortization Amount
Customer base 14 years $ 525 $ 198 $ 327 $ 492 $ 155 $ 337
Distribution network 25 years 123 49 74 123 44 79
Trademarks 20 years 210 25 185 191 15 176
Technology, patents and non-compete 6 years 40 28 12 40 22 18
Total Intangible Assets $ 898 $ 300 $ 598 $ 846 $ 236 $ 610
Amortization expense related to intangible assets was $64, $58
and $46 for the years ended December 31, 2009, 2008 and 2007,
respectively and, excluding the impact of additional acquisitions,
is expected to approximate $64 annually from 2010 through 2012 and
$55 annually through 2014. Amortization expense is primarily recorded
in Other expenses, net with the exception of amortization expense
associated with licensed technology, which is recorded in Cost of sales.