(Source: Business Wire)
Xerox Corporation (NYSE: XRX) announced today third-quarter 2009 results
that include earnings per share of 14 cents and $610 million in
operating cash flow.
"Our third-quarter performance reflects our continued disciplined
approach to managing cash and reducing costs," said Ursula
M. Burns, Xerox chief executive officer. "As a result, we exceeded
our expectations for earnings and operating cash flow, and are
benefiting from operational improvements that are mitigating the
economic challenges."
The company reported third-quarter total revenue of $3.7 billion, down
16 percent from third-quarter 2008 including a 2 point negative impact
from currency. Post-sale and financing revenue was down 11 percent, or 9
percent in constant currency. Equipment sale revenue declined 29
percent, or 28 percent in constant currency.
"Just as we are closely managing costs, our customers are doing the same
and we have not seen a meaningful shift towards increased spending on
technology," she added. "For many of our business clients -- small to
large -- there remains a hesitancy to invest until more economic factors
show signs of steady improvement. We expect this trend will continue to
put pressure on revenue for the balance of the year.
"At the same time, we're winning new business from clients who want to
reduce their cost base through our industry-leading managed
print services," said Burns. "Scaling our services business has long
been a strategic focus. The growth opportunity is significant, customers
are demanding more service-related value, and the multi-year contracts
provide profitable recurring revenue. These factors give us confidence
in the strategic and financial rationale for acquiring Affiliated
Computer Services. With this acquisition and the benefits of our
existing annuity-based business, we'll deliver significant revenue
growth, cash and earnings expansion."
Third-quarter operating cash flow was $610 million. Through the third
quarter, the company has generated $1.2 billion in operating cash flow,
and, as a result, has increased its expectation for the full year to
$1.7 billion. Xerox ended the third quarter with a cash balance of $1.2
billion. Total debt was down $938 million through the first three
quarters, and the company is on track to reduce total debt by more than
$1 billion this year.
Gross margin was 39.8 percent in the third quarter, an increase of over
half a point from the prior year. Third-quarter selling, administrative
and general expenses were down year over year by $131 million and SAG as
a percent of revenue was 27.4 percent.
Xerox expects fourth-quarter 2009 earnings per share in the range of 20
cents to 22 cents, excluding costs related to the acquisition of ACS.
The company has increased its full-year earnings expectations to 55
cents to 57 cents per share, which excludes fourth-quarter ACS
acquisition related costs. Prior guidance for full-year 2009 was 50
cents to 55 cents per share.
This release 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. In addition, fourth-quarter and
full-year 2009 EPS has been provided without including fourth-quarter
ACS acquisition related costs, which cannot be specifically quantified
at this time.
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
unprecedented volatility in the global economy; 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 savings from restructuring
actions; 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; the risk that the future business operations of
Affiliated Computer Services, Inc. ("ACS") will not be successful; the
risk that customer retention and revenue expansion goals for the ACS
transaction will not be met; the risk that disruptions from the ACS
transaction will harm relationships with customers, employees and
suppliers; 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 Report on Form 10-Q for the quarters
ended March 31, 2009 and June 30, 2009 and our 2008 Annual Report on
Form 10-K 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.
Xerox and ACS urge investors and security holders to read the joint
proxy statement/prospectus regarding the proposed transaction when it
becomes available because it will contain important information. You may
obtain a free copy of the joint proxy statement/prospectus, as well as
other filings containing information about Xerox and ACS, without
charge, at the Securities and Exchange Commission's (SEC) Internet site (http://www.sec.gov).
Copies of the joint proxy statement/prospectus and the filings with the
SEC that will be incorporated by reference in the joint proxy
statement/prospectus can also be obtained, when available, without
charge, from Xerox's website, http://www.xerox.com,
under the heading "Investor Relations" and then under the heading "SEC
Filings". You may also obtain these documents, without charge, from
ACS's website, http://www.acs-inc.com,
under the tab "Investor Relations" and then under the heading "SEC
Filings". Information regarding participants or persons who may be
deemed to be participants in the solicitation of proxies in respect of
the proposed transaction is contained in Xerox's proxy statement for its
most recent annual meeting and ACS's proxy statement for its most recent
annual meeting, both as filed with the SEC.
For more information on Xerox, visit http://www.xerox.com
or http://www.xerox.com/news.
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http://www.xerox.com/podcasts
or http://www.xerox.com/thoughtleaders.
Xerox®, and the sphere of connectivity design are trademarks of Xerox
Corporation in the United States and/or other countries.
Xerox Corporation Condensed Consolidated Statements of Income (Unaudited)(1)
Three Months Ended Nine Months Ended
September 30, September 30,
(in millions, except per-share data) 2009 2008 % Change 2009 2008 % Change
Revenues
Sales $ 1,555 $ 2,047 (24 %) $ 4,651 $ 6,179 (25 %)
Service, outsourcing and rentals 1,942 2,126 (9 %) 5,773 6,446 (10 %)
Finance income 178 197 (10 %) 536 613 (13 %)
Total Revenues 3,675 4,370 (16 %) 10,960 13,238 (17 %)
Costs and Expenses
Cost of sales 1,031 1,340 (23 %) 3,100 4,059 (24 %)
Cost of service, outsourcing and rentals 1,113 1,241 (10 %) 3,313 3,747 (12 %)
Equipment financing interest 67 75 (11 %) 204 234 (13 %)
Research, development and engineering expenses 209 228 (8 %) 615 672 (8 %)
Selling, administrative and general expenses 1,007 1,138 (12 %) 3,024 3,432 (12 %)
Restructuring and asset impairment charges (2 ) 14 * (5 ) 80 *
Other expenses, net 92 87 6 % 276 1,022 (73 %)
Total Costs and Expenses 3,517 4,123 (15 %) 10,527 13,246 (21 %)
Income (Loss) before Income Taxes & Equity Income(2) 158 247 (36 %) 433 (8 ) *
Income tax expense (benefit) 44 15 * 122 (172 ) *
Equity in net income of unconsolidated affiliates 15 35 (57 %) 14 92 (85 %)
Net Income 129 267 (52 %) 325 256 27 %
Less: Net income attributable to noncontrolling interests 6 9 (33 %) 20 27 (26 %)
Net Income Attributable to Xerox $ 123 $ 258 (52 %) $ 305 $ 229 33 %
Basic Earnings per Share $ 0.14 $ 0.30 (53 %) $ 0.35 $ 0.26 35 %
Diluted Earnings per Share $ 0.14 $ 0.29 (52 %) $ 0.35 $ 0.25 40 %
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* Percent change not meaningful.
((1)) See "Accounting Changes" section for discussion of change in presentation of Noncontrolling Interests.
((2)) Referred to as "Pre-Tax Income" throughout the remainder of this document.
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Xerox Corporation Condensed Consolidated Balance Sheets (Unaudited)(1)
September 30, December 31,
(in millions, except share data in thousands) 2009 2008
Assets
Cash and cash equivalents $ 1,159 $ 1,229
Accounts receivable, net 1,863 2,184
Billed portion of finance receivables, net 256 254
Finance receivables, net 2,386 2,461
Inventories 1,069 1,232
Other current assets 707 790
Total current assets 7,440 8,150
Finance receivables due after one year, net 4,381 4,563
Equipment on operating leases, net 550 594
Land, buildings and equipment, net 1,351 1,419
Investments in affiliates, at equity 1,051 1,080
Intangible assets, net 609 610
Goodwill 3,405 3,182
Deferred tax assets, long-term 1,673 1,692
Other long-term assets 1,293 1,157
Total Assets $ 21,753 $ 22,447
Liabilities and Equity
Short-term debt and current portion of long-term debt $ 1,149 $ 1,610
Accounts payable 1,292 1,446
Accrued compensation and benefits costs 616 625
Other current liabilities 1,373 1,769
Total current liabilities 4,430 5,450
Long-term debt 6,297 6,774
Liability to subsidiary trust issuing preferred securities 649 648
Pension and other benefit liabilities 1,870 1,747
Post-retirement medical benefits 873 896
Other long-term liabilities 603 574
Total Liabilities 14,722 16,089
Common stock 870 866
Additional paid-in-capital 2,463 2,447
Retained earnings 5,532 5,341
Accumulated other comprehensive loss (1,967 ) (2,416 )
Xerox Shareholders' Equity 6,898 6,238
Noncontrolling interests 133 120
Total Equity 7,031 6,358
Total Liabilities and Equity $ 21,753 $ 22,447
Shares of common stock issued and outstanding 869,245 864,777
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((1)) See "Accounting Changes" section for a discussion of the change in presentation of noncontrolling interests.
