Xerox 2010 Annual Report Download - page 70

Notes to the Consolidated
Financial Statements
Dollars in millions, except per-share data and unless otherwise indicated.
68 Xerox 2010 Annual Report
average exercise price of $6.79 per option. The estimated fair value
associated with the Xerox options issued in exchange for the ACS options
was approximately $222 based on a Black-Scholes valuation model
(refer to Note 19 – Shareholders’ Equity for assumptions). Approximately
$168 of the estimated fair value is associated with options issued prior
to August 2009, which became fully vested and exercisable upon the
acquisition in accordance with pre-existing change-in-control provisions,
was recorded as part of the acquisition fair value. The remaining $54 is
associated with options issued in August 2009 which continue to vest
according to their original terms and therefore is being expensed as
compensation cost over the remaining vesting period which is estimated
to be approximately 3.9 years.
All ACS stock options outstanding at closing were assumed by Xerox
and converted into Xerox stock options. ACS stock options issued prior
to August 2009, whether or not then vested and exercisable, became
fully vested and exercisable in accordance with preexisting change-in-
control provisions. ACS stock options issued in August 2009 will continue
to vest and become exercisable for Xerox common stock in accordance
with their original terms. For the August 2009 options, the portion of
the estimated fair value associated with service prior to the close was
recorded as part of the acquisition fair value with the remainder to be
recorded as future compensation cost over the remaining vesting period.
Each assumed ACS option became exercisable for 7.085289 Xerox
common shares for a total of 96,662 thousand shares at a weighted
Fair value of consideration transferred: The table below details the
consideration transferred to acquire ACS (certain amounts reflect
rounding adjustments):
(shares in millions) Conversion Calculation Estimated Fair Value Form of Consideration
ACS Class A shares outstanding as of the acquisition date 92.7
ACS Class B shares outstanding as of the acquisition date 6.6
Total ACS Shares Outstanding 99.3
Xerox stock price as of the acquisition date $ 8.47
Multiplied by the exchange ratio 4.935
Equity Consideration per Common Share Outstanding $ 41.80 $ 4,149 Xerox common stock
Cash Consideration per Common Share Outstanding $ 18.60 $ 1,846 Cash
ACS stock options exchanged for a Xerox equivalent stock option 13.6
Multiplied by the option exchange ratio 7.085289
Total Xerox Equivalent Stock Options 96.7 $ 168 Xerox stock options
Xerox Preferred Stock Issued to ACS Class B Shareholder $ 349 Xerox preferred stock
Total Fair Value of Consideration Transferred $ 6,512
Recording of assets acquired and liabilities assumed: The transaction
has been accounted for using the acquisition method of accounting
which requires, among other things, that most assets acquired and
liabilities assumed be recognized at their fair values as of the acquisition
date. The following table summarizes the assets acquired and liabilities
assumed as of the acquisition date:
February 5, 2010
Assets
Cash and cash equivalents $ 351
Accounts receivable 1,344
Other current assets 389
Land, buildings and equipment 416
Intangible assets 3,035
Goodwill 5,127
Other long-term assets 258
Liabilities
Other current liabilities 645
Deferred revenue 161
Deferred tax liability 990
Debt 2,310
Pension liabilities 39
Other long-term liabilities 263
Net Assets Acquired $ 6,512