Xerox 2011 Annual Report Download - page 40

Management’s Discussion
38
Other Expenses, Net
Year Ended December 31,
(in millions) 2011 2010 2009
Non-financing interest expense $ 247 $ 346 $ 256
Interest income (21) (19) (21)
Gains on sales of businesses
and assets (9) (18) (16)
Currency losses, net 12 11 26
ACS shareholders litigation
settlement — 36 —
Litigation matters 11 (4) 9
Loss on early extinguishment
of liability 33 15 —
All other expenses, net 49 22 31
Total Other Expenses, Net $ 322 $ 389 $ 285
Non-nancingInterestExpense: Non-financing interest expense for the
year ended December 31, 2011 of $247 million was $99 million lower
than the prior year. The decreases in interest expense reflect a lower
average debt balance due to the repayments of Senior Notes, as well as
the benefit of lower borrowing costs achieved as a result of refinancing
existing debt and utilizing the commercial paper program.
Non-financing interest expense for the year ended December 31,
2010 of $346 million was $90 million higher than the prior year. The
increase is due to higher average debt balances primarily resulting
from the funding of the ACS acquisition, partially offset by the early
extinguishment of certain debt instruments as well as the scheduled
repayments of other debt.
GainsonSalesofBusinessesandAssets: Gains on sales of businesses
and assets for the three years ended December 31, 2011 were primarily
related to the sales of certain surplus facilities in Latin America.
CurrencyLosses,Net:Currency losses primarily result from the re-
measurement of foreign currency-denominated assets and liabilities, the
cost of hedging foreign currency-denominated assets and liabilities, the
mark-to-market of foreign exchange contracts utilized to hedge those
foreign currency-denominated assets and liabilities and the mark-to-
market impact of hedges of anticipated transactions, primarily future
inventory purchases, for those to which we do not apply cash flow hedge
accounting treatment.
Amortization of Intangible Assets
During the year ended December 31, 2011, we recorded $398 million
of expense related to the amortization of intangible assets, which is $86
million higher than the prior year. $52 million of the increase reflects the
accelerated write-off of the ACS trade name as a result of the decision
to discontinue its use and transition the services business to the “Xerox
Services” trade name. The remainder of the increase primarily reflects
the additional month of amortization of intangibles associated with our
acquisition of ACS in 2010, as well as the amortization of intangible assets
associated with other prior-year acquisitions.
Curtailment Gain
In December 2011, we amended all of our primary non-union U.S. defined
benefit pension plans for salaried employees. Our primary qualified plans
had previously been amended to freeze the final average pay formulas
within the plans as of December 31, 2012, but the cash balance service
credit was expected to continue post-December 31, 2012. The 2011
amendments now fully freeze benefit and service accruals after December
31, 2012 for these plans, including the related non-qualified plans. As a
result of these plan amendments, we recognized a pre-tax curtailment
gain of $107 million ($66 million after-tax), which represents the
recognition of deferred gains from other prior-year amendments (“prior
service credits”) as a result of the discontinuation (“freeze”) of any future
benefit or service accrual period. The amendments are not expected to
materially impact 2012 pension expense.
Worldwide Employment
Worldwide employment of 139,650 at December 31, 2011 increased
approximately 3,100 from December 31, 2010, primarily due to the
impact of acquisitions, partially offset by restructuring-related actions.
Worldwide employment was approximately 136,500 and 53,600 at
December 2010 and 2009, respectively.