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Xerox Reports Fourth-Quarter 2008 Results
Posted by: gurufocus (IP Logged)
Date: January 23, 2009 12:01PM
NORWALK, Conn.--(BUSINESS WIRE)--Xerox Corporation (NYSE: XRX) announced today fourth-quarter 2008 financial performance that, including previously disclosed restructuring charges, resulted in break-even earnings per Press Release: Xerox Reports Fourth-Quarter 2008 Results
NORWALK, Conn.--(BUSINESS WIRE)--Xerox Corporation (NYSE: XRX) announced today fourth-quarter 2008 financial performance that, including previously disclosed restructuring charges, resulted in break-even earnings per share and adjusted earnings per share of 30 cents. Adjustments include a restructuring charge of 27 cents per share as well as an equipment write-off of 3 cents per share.
The company’s full-year 2008 net income was $230 million, including a previously announced litigation charge. Excluding charges, adjusted net income was $985 million for the year. Total revenue was $17.6 billion, a 2 percent increase from full-year 2007. The company generated $939 million of operating cash flow. Adjusted core cash flow for the year was $1.7 billion.
“In the fourth quarter, the continued weakening economy and rapid shift in exchange rates put pressure on the business,” said Anne Mulcahy, chairman and chief executive officer. “Despite this challenging marketplace, we delivered $265 million in adjusted net income for the quarter and $985 million for the year.”
“We continue to prioritize cash and productivity to give us flexibility in this uncertain environment,” she added. “Our fourth-quarter restructuring will deliver $200 million in savings this year. And, last year we generated $1.7 billion in adjusted cash from core operations. We believe our strong balance sheet and disciplined approach to cost reductions strengthen our ability to effectively manage through these tough economic times.”
In the fourth quarter, Xerox generated $1 billion in adjusted cash from core operations, excluding net litigation payments of $615 million. The company closed the year with $1.2 billion in cash and cash equivalents.
Total revenue of $4.4 billion declined 10 percent in the quarter, including a 5 point negative impact from currency. Post-sale and financing revenue was down 8 percent or 3 percent in constant currency, largely due to distributors holding lower inventory levels. Equipment sale revenue declined 15 percent or 11 percent in constant currency, reflecting weakened economic conditions around the world.
Revenue from the company’s developing markets, which delivered 17 percent revenue growth through the third quarter of 2008, was down 14 percent in the fourth quarter largely due to the decline in developing markets exchange rates and the rapid weakening of Russian and eastern European economies.
Fourth-quarter revenue from color was down 6 percent or flat in constant currency. Color pages were up 23 percent and now represent 18 percent of total pages printed on Xerox technology. Color results exclude the benefit from Global Imaging Systems.
Xerox services help businesses simplify work processes, manage office technology and in-house print shops, digitize paper files, create digital archives and much more. During 2008, Xerox Global Services generated $3.5 billion in annuity revenue, a 3 percent increase over 2007.
“We remain confident that the value we bring to our customers can help them through this economy. Much of what we do is aimed squarely at helping our customers reduce costs and operate more efficiently and effectively. Our services business continues to grow and we’re prioritizing investments to build on this momentum in 2009,” added Mulcahy. “Discussions with customers about saving up to 30 percent on their document costs get attention. It’s a powerful value proposition in any economy.”
Xerox’s production business provides commercial printers and document-intensive industries with high-speed digital printing and services that enable on-demand, personalized printing. The weakening economy resulted in a 13 percent decline in total production revenue, including a 7 point negative impact from currency. Installs of production black-and-white systems declined 11 percent. Installs of production color devices were up 4 percent in the quarter driven by strong demand for the company’s new production systems, the Xerox iGen4™ Press and the Xerox 700 Digital Color Press, both of which were available worldwide beginning in September.
In Xerox’s office business, which provides the industry’s broadest portfolio of printers, copiers, and multifunction systems through a global network of sales channels, the number of installs of color multifunction systems was up 9 percent in the fourth quarter. Installs of the company’s black-and-white multifunction devices decreased 18 percent. Total office revenue was down 9 percent in the fourth quarter including a 4 point negative impact from currency.
Gross margin was 37.9 percent. Excluding the equipment write-off, adjusted gross margin was 38.8 percent, down 1.7 points from the fourth quarter of 2007. This decline was almost entirely due to increased product costs driven by the rapid strengthening of the Yen. Selling, administrative and general expenses were 25.2 percent of revenue, up about 1 point from fourth-quarter 2007.
Xerox expects first-quarter 2009 earnings in the range of 16 cents to 20 cents per share.
Note: This release refers to several non-GAAP financial measures described as “adjusted” - earnings per share, net income, gross margin and cash from core operations - that exclude the effects of certain fourth quarter and full year items. Additionally, it discusses revenue growth using a measure noted as “Constant Currency” that excludes the effects of currency translation. Refer to the “Non-GAAP Financial Measures” section of this release for a discussion of these non-GAAP measures and their reconciliation to the reported GAAP measure.
This release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “will,” “should” and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect management’s current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. These factors include but are not limited to the risk that we will not realize all of the anticipated benefits from our 2007 acquisition of Global Imaging Systems, Inc; the risk that unexpected costs will be incurred; the outcome of litigation and regulatory proceedings to which we may be a party; actions of competitors; changes and developments affecting our industry; quarterly or cyclical variations in financial results; development of new products and services; interest rates and cost of borrowing; our ability to protect our intellectual property rights; our ability to maintain and improve cost efficiency of operations, including actions with respect to the fourth-quarter 2008 $240 million after-tax net restructuring and asset impairment charge; changes in foreign currency exchange rates; changes in economic conditions, political conditions, trade protection measures, licensing requirements and tax matters in the foreign countries in which we do business; reliance on third parties for manufacturing of products and provision of services; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2008, June 30, 2008, September 30, 2008 and our 2007 Annual Report filed with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.
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