Notes to the Consolidated Financial Statements
(Dollars in millions, except per-share data and unless otherwise indicated)
Note 2 – Segment Reporting
Our reportable segments are consistent with how we manage the business and view the markets we serve. Our reportable segments are Production, Office and Other. The Production and Office segments are centered on strategic product groups which share common technology, manufacturing and product platforms, as well as classes of customers.
The Production segment includes black-and-white products which operate at speeds over 90 pages per minute (“ppm”), excluding 95 ppm with an embedded controller, and color products which operate at speeds over 40 ppm, excluding 50, 60 and 70 ppm products with an embedded controller. Products include the Xerox® iGen3 and iGen4 digital color production press, Xerox® Nuvera, DocuTech®, DocuPrint® and DocuColor families, as well as older-technology light-lens products. These products are sold predominantly through direct sales channels to Fortune 1000, graphic arts, government, education and other public sector customers.
The Office segment includes black-and-white products which operate at speeds up to 95 ppm and color devices up to 85 ppm. Products include our family of ColorQube, WorkCentre multifunction printers, Phaser desktop printers and digital multifunction printers, DocuColor color multifunction products, color laser, solid ink color printers and multifunction devices, monochrome laser desktop printers, digital and light-lens copiers and facsimile products, and non-Xerox branded products with similar specifications. These products are sold through direct and indirect sales channels to global, national and mid-size commercial customers, as well as government, education and other public sector customers.
The segment classified as Other includes several units, none of which met the thresholds for separate segment reporting. This group primarily includes Xerox Supplies Business Group (predominantly paper sales), Value-Added Services, Wide Format Systems, Xerox Technology Enterprises, royalty and licensing revenues, GIS network integration solutions and electronic presentation systems, equity net income and non-allocated Corporate items. Other segment profit (loss) includes the operating results from these entities, other less-significant businesses, our equity income from Fuji Xerox, and certain costs which have not been allocated to the Production and Office segments, including non-financing interest, as well as other items included in Other expenses, net. Selected financial information for our Operating segments for each of the years ended December 31, 2009, 2008 and 2007, respectively, was as follows:
| Production | Office | Other | Total | ||||||||||
|
2009(1) |
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|
Revenues |
$ | 4,287 | $ | 8,135 | $ | 2,044 | $ | 14,466 | |||||
|
Finance income |
258 | 441 | 14 | 713 | |||||||||
|
Total Segment Revenues |
$ | 4,545 | $ | 8,576 | $ | 2,058 | $ | 15,179 | |||||
|
Interest expense |
$ | 101 | $ | 165 | $ | 261 | $ | 527 | |||||
|
Segment profit (loss)(2) |
$ | 217 | $ | 835 | $ | (274 | ) | $ | 778 | ||||
|
Equity in net income of unconsolidated affiliates |
$ | — | $ | — | $ | 41 | $ | 41 | |||||
|
2008(1) |
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|
Revenues |
$ | 4,937 | $ | 9,347 | $ | 2,526 | $ | 16,810 | |||||
|
Finance income |
300 | 481 | 17 | 798 | |||||||||
|
Total Segment Revenues |
$ | 5,237 | $ | 9,828 | $ | 2,543 | $ | 17,608 | |||||
|
Interest expense |
$ | 117 | $ | 181 | $ | 269 | $ | 567 | |||||
|
Segment profit (loss)(2) |
$ | 394 | $ | 1,062 | $ | (165 | ) | $ | 1,291 | ||||
|
Equity in net income of unconsolidated affiliates |
$ | — | $ | — | $ | 113 | $ | 113 | |||||
|
2007(1) |
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|
Revenues |
$ | 5,001 | $ | 8,980 | $ | 2,425 | $ | 16,406 | |||||
|
Finance income |
314 | 493 | 15 | 822 | |||||||||
|
Total Segment Revenues |
$ | 5,315 | $ | 9,473 | $ | 2,440 | $ | 17,228 | |||||
|
Interest expense |
$ | 123 | $ | 186 | $ | 270 | $ | 579 | |||||
|
Segment profit (loss)(2) |
$ | 562 | $ | 1,115 | $ | (89 | ) | $ | 1,588 | ||||
|
Equity in net income of unconsolidated affiliates |
$ | — | $ | — | $ | 97 | $ | 97 | |||||
(1) Asset information on a segment basis is not disclosed, as this information is not separately identified and internally reported to our chief executive officer.
(2) Depreciation and amortization expense, which is recorded in cost of sales, RD&E and SAG are included in segment profit above. This information is neither identified nor internally reported to our chief executive officer. The separate identification of this information for purposes of segment disclosure is impracticable, as it is not readily available and the cost to develop it would be excessive.
The following is a reconciliation of segment profit to pre-tax income (loss):
| Year Ended December 31, | ||||||||||||
| 2009 | 2008 | 2007 | ||||||||||
|
Total Segment Profit |
$ | 778 | $ | 1,291 | $ | 1,588 | ||||||
|
Reconciling items: |
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|
Restructuring and asset impairment charges |
8 | (429 | ) | 6 | ||||||||
|
Restructuring charges of Fuji Xerox |
(46 | ) | (16 | ) | (30 | ) | ||||||
|
Litigation matters(1) |
— | (774 | ) | — | ||||||||
|
Equipment write-off |
— | (39 | ) | — | ||||||||
|
ACS acquisition-related costs |
(72 | ) | — | — | ||||||||
|
Equity in net income of unconsolidated affiliates |
(41 | ) | (113 | ) | (97 | ) | ||||||
|
Other |
— | 1 | 1 | |||||||||
|
Pre-tax Income (Loss) |
$ | 627 | $ | (79 | ) | $ | 1,468 | |||||
(1) The 2008 provision for litigation represents $670 for the Carlson v. Xerox Corporation court-approved settlement, as well as provisions for other litigation matters including $36 for the probable loss related to the Brazil labor-related contingencies. Refer to Note 16 – Contingencies for further discussion.
Geographic area data is based upon the location of the subsidiary reporting the revenue or long-lived assets and is as follows:
| Revenues | Long-lived Assets(1) | |||||||||||||||||
| 2009 | 2008 | 2007 | 2009 | 2008 | 2007 | |||||||||||||
|
United States |
$ | 8,156 | $ | 9,122 | $ | 9,078 | $ | 1,245 | $ | 1,386 | $ | 1,375 | ||||||
|
Europe |
4,971 | 6,011 | 5,888 | 717 | 680 | 746 | ||||||||||||
|
Other Areas |
2,052 | 2,475 | 2,262 | 260 | 248 | 341 | ||||||||||||
|
Total Revenues and Long-lived Assets |
$ | 15,179 | $ | 17,608 | $ | 17,228 | $ | 2,222 | $ | 2,314 | $ | 2,462 | ||||||
(1) Long-lived assets are comprised of (i) land, buildings and equipment, net, (ii) equipment on operating leases, net, (iii) internal use software, net and iv) capitalized software costs, net.