Xerox 2012 Annual Report Download - page 72

Notes to Consolidated Financial Statements
(in millions, except per-share data and where otherwise noted)
70
for the customer contracts related to this operation. We agreed to
pay $17 for the acquired net assets and the seller agreed to pay us
$52, which represented the fair value of the liabilities assumed for
a net cash receipt of $35. The assumed liabilities primarily include
customer contract liabilities representing the estimated fair value of
the obligations associated with the assumed customer contracts. We
are recognizing these liabilities over a weighted-average period of
approximately two years consistent with the cash outflows from the
contracts. Symcor specializes in outsourcing services for U.S. financial
institutions and its offerings range from cash management services to
statement and check processing.
In July 2011, we acquired Education Sales and Marketing, LLC (“ESM”),
a leading provider of outsourced enrollment management and student
loan default solutions, for approximately $43 net of cash acquired.
The acquisition of ESM enables us to offer a broader range of services
to assist post-secondary schools in attracting and retaining the most
qualified students while reducing accreditation risk.
In April 2011, we acquired Unamic/HCN B.V., the largest privately-
owned customer care provider in the Benelux region in Western Europe,
for approximately $55 net of cash acquired. Unamic/HCN’s focus on
the Dutch-speaking market expands our customer care capabilities in
the Netherlands, Belgium, Turkey and Suriname.
In February 2011, we acquired Concept Group, Ltd. for $41 net of
cash acquired. This acquisition expands our reach into the small and
mid-size business market in the U.K. Concept Group has nine locations
throughout the U.K. and provides document imaging solutions and
technical services to more than 3,000 customers.
In October 2010, we acquired TMS Health, LLC (“TMS”), a U.S. based
teleservices company that provides customer care services to the
pharmaceutical, biotech and healthcare industries, for approximately
$48 in cash. TMS enables us to improve communications among
pharmaceutical companies, physicians, consumers and pharmacists. By
providing customer education, product sales and marketing and clinical
trial solutions, we augment the IT and BPO services we deliver to the
healthcare and pharmaceutical industries.
In July 2010, we acquired ExcellerateHRO, LLP (“EHRO”), a global
benefits administration and relocation services provider, for $125 net
of cash acquired. EHRO established us as one of the world’s largest
pension plan administrators and as a leading provider of outsourced
health and welfare and relocation services.
Our Document Technology segment also acquired seven additional
businesses in 2011 and two additional businesses in 2010 for $21
and $50, respectively, in cash as part of our strategy of increasing our
distribution network for small and mid-size businesses. Our Services
segment acquired three additional businesses in 2011 and one
additional business in 2010 for $25 and $12, respectively, in cash
primarily related to software to support our BPO service offerings.
Summary – 2011 and 2010 Acquisitions
All of our 2011 and 2010 acquisitions reflected 100% ownership
of the acquired companies. The operating results of the 2011 and
2010 acquisitions described above were not material to our financial
statements and were included within our results from the respective
acquisition dates. Breakaway, Symcor, ESM, Unamic/HCN, TMS and
EHRO were included within our Services segment while the acquisitions
of MBM and Concept Group were primarily included within our
Document Technology segment. The purchase price for all acquisitions,
except Symcor, was primarily allocated to intangible assets and
goodwill based on third-party valuations and management’s estimates.
Refer to Note 9 – Goodwill and Intangible Assets, Net for additional
information. Our 2011 acquisitions contributed aggregate revenues
from their respective acquisition dates of approximately $397 and
$177 to our 2012 and 2011 total revenues, respectively. Excluding
ACS, our 2010 acquisitions contributed aggregate revenues from their
respective acquisition dates of approximately $323, $318 and $140 to
our 2012, 2011 and 2010 total revenues, respectively.
Contingent Consideration
In connection with certain acquisitions, we are obligated to make
contingent payments if specified contractual performance targets
are achieved. Contingent consideration obligations are recorded at
their respective fair value. As of December 31, 2012, the maximum
aggregate amount of outstanding contingent obligations to former
owners of acquired entities was approximately $55, of which $32 was
accrued representing the estimated fair value of this obligation.
Affiliated Computer Services, Inc. (“ACS”)
In February 2010, we acquired ACS in a cash-and-stock transaction
valued at approximately $6.5 billion. Each outstanding share of ACS
common stock was converted into a combination of 4.935 shares of
Xerox common stock and $18.60 in cash. We also issued convertible
preferred stock with a fair value of $349 and stock options valued at
$222. Refer to Note 18 – Preferred Stock and Note 19 – Shareholders’
Equity for additional information regarding the issuance of preferred
stock and stock options, respectively. In addition, we repaid $1.7 billion
of ACS’s debt and assumed an additional $0.6 billion of debt. The total
aggregate purchase price was $8.8 billion.
The transaction was accounted for using the acquisition method of
accounting which requires, among other things, that most assets
acquired and liabilities assumed are recognized at their fair values as
of the acquisition date. The acquisition of ACS resulted in recognized
Goodwill of $5.1 billion and Intangible assets of $3.0 billion. The
operating results of ACS are included in our Services segment from
February 6, 2010. Had we acquired ACS on January 1, 2010, full year
2010 revenues, net income and diluted EPS would have been $22,252,
$592 and $0.41, respectively.