Xerox 2011 Annual Report Download - page 78

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Note 6 – Land, Buildings and Equipment, Net
Land, buildings and equipment, net were as follows:
December 31,
Estimated
Useful Lives
(Years) 2011 2010
Land $60 $63
Buildings and building equipment 25 to 50 1,121 1,133
Leasehold improvements Varies 461 455
Plant machinery 5 to 12 1,557 1,607
Office furniture and equipment 3 to 15 1,470 1,306
Other 4 to 20 99 115
Construction in progress 93 67
Subtotal 4,861 4,746
Accumulated depreciation (3,249) (3,075)
Land, Buildings and Equipment, Net $1,612 $1,671
Depreciation expense and operating lease rent expense were as follows:
Year Ended December 31,
2011 2010 2009
Depreciation expense $ 405 $ 379 $ 247
Operating lease rent expense(1) 681 632 267
(1) We lease certain land, buildings and equipment, substantially all of which are
accounted for as operating leases.
Future minimum operating lease commitments that have initial or
remaining non-cancelable lease terms in excess of one year at December
31, 2011 were as follows:
2012 2013 2014 2015 2016 Thereafter
$637 $503 $296 $168 $83 $103
We have an information management contract with HP Enterprise
Services (“HPES”) which runs through 2014. Services provided under this
contract include support for European mainframe system processing,
as well as workplace, service desk and voice and data network
management. We can terminate the contract for convenience without
paying a termination fee by providing 60 days prior notice. Should we
terminate the contract for convenience, we have an option to purchase
the assets placed in service under the HPES contract. We also have
several agreements for similar services with other third-party providers.
These contracts have various terms through 2016 and include desktop
services, voice and data network-related services, mainframe application,
development and support and mid-range applications processing and
support. Payments for our outsourced information management services,
which are primarily recorded in selling, administrative and general
expenses, were $82, $142 and $224 for the years ended December 31,
2011, 2010 and 2009, respectively.
Note 5 – Inventories and Equipment on Operating
Leases, Net
The following is a summary of Inventories by major category:
December 31,
2011 2010
Finished goods $ 866 $ 858
Work-in-process 58 46
Raw materials 97 87
Total Inventories $ 1,021 $ 991
The transfer of equipment from our inventories to equipment subject to an
operating lease is presented in our Consolidated Statements of Cash Flows
in the operating activities section. Equipment on operating leases and
similar arrangements consists of our equipment rented to customers and
depreciated to estimated salvage value at the end of the lease term. We
recorded $39, $31 and $52 in inventory write-down charges for the years
ended December 31, 2011, 2010 and 2009, respectively.
Equipment on operating leases and the related accumulated depreciation
were as follows:
December 31,
2011 2010
Equipment on operating leases $ 1,556 $ 1,561
Accumulated depreciation (1,023) (1,031)
Equipment on Operating Leases, Net $ 533 $ 530
Depreciable lives generally vary from three to four years, consistent with
our planned and historical usage of the equipment subject to operating
leases. Depreciation and obsolescence expense for equipment on
operating leases was $294, $313 and $329 for the years ended December
31, 2011, 2010 and 2009, respectively. Our equipment operating lease
terms vary, generally from 12 to 36 months. Scheduled minimum future
rental revenues on operating leases with original terms of one year or
longer are:
2012 2013 2014 2015 2016 Thereafter
$392 $295 $199 $113 $59 $23
Total contingent rentals on operating leases, consisting principally of
usage charges in excess of minimum contracted amounts, for the years
ended December 31, 2011, 2010 and 2009 amounted to $154, $133 and
$125, respectively.
Notes to the Consolidated
Financial Statements
(in millions, except per-share data and where otherwise noted)