Xerox Announces Earnings; Improvements Exceed Expectations
Friday, April 20, 2001
STAMFORD, Conn., April 19, 2001-- Xerox Corporation (NYSE:XRX) today announced a first quarter operations loss of 12 cents per share, better than expectations. Including gains from asset sales and net restructuring charges, the company reported earnings of 19 cents per share. "Xerox's performance in the first quarter is evidence of significant cash and operational improvements as well as the effectiveness of our turnaround strategy," said Paul A. Allaire, Xerox chairman and chief executive officer. "Xerox people delivered on a commitment to improve results by winning customers' confidence and aggressively reducing costs. We are executing a successful turnaround that we expect will return Xerox to profitability this year." "Several of the issues negatively affecting performance in 2000 improved in the first quarter, including a strengthened North American sales force that captured significant customer wins and delivered profitable results," said Anne M. Mulcahy, president and chief operating officer. "Driven by revenue growth in North America and a stabilization in Europe, our first quarter results provide a solid foundation for Xerox's turnaround." First quarter revenue was $4.2 billion, 8 percent lower than the first quarter of 2000. Pre-currency revenue declined 6 percent, significantly improving from a double- digit decline in the fourth quarter. Modest North American revenue growth was offset by a slight decline in Europe and a 20 percent decline in developing markets as the company reconfigures its operations in Latin America to prioritize cash and profitability. Gross margins in the first quarter stabilized from fourth quarter 2000 despite adverse performance in developing markets. Black-and-white production revenues improved from recent trends. Color revenue in the first quarter grew 16 percent led by continued strong placements of the DocuColor 12 and 2000 families and Phaser color printers. Recurring document outsourcing revenues were up 18 percent in the first quarter, reflecting continued growth and solidifying the company's leadership position in the document services market. Xerox also reported progress in reducing its overall cost base. "With selling, general and administrative expenses down 5 percent and an unprecedented first quarter reduction in excess of $100 million in inventory, we are clearly benefiting from the aggressive attack on our cost base and focus on operational improvements," said Mulcahy. "We are ahead of schedule in implementing our cost-reduction plans and have taken actions that account for substantially more than half of our $1 billion year-end target, including the reduction of 4,300 jobs worldwide in the first quarter." Research and development spending remained stable from the first quarter of 2000 as Xerox continued to invest in advanced product technologies and innovative document solutions. The company also recorded unhedged currency gains of 5 cents per share. Xerox noted progress on all elements of its turnaround program, citing the recent $1.3 billion cash sale of half its stake in Fuji Xerox to Fuji Photo Film and the agreement with Resonia Leasing AB to provide equipment financing for Xerox's Nordic customers. Xerox is also selling its Nordic lease receivables to Resonia for approximately $370 million. As reported, after receiving $285 million from Resonia, the company's worldwide cash balance was $3.1 billion, up from $1.7 billion from year-end 2000. Xerox today also filed a form 8-K with the Securities and Exchange Commission containing unaudited 2000 basic financial statements and other company information. Looking forward, Allaire commented that the company expects an operations loss in the second quarter in line with first-quarter results. "Our expectation is to return Xerox to profitability in the second half and for the full year," said Allaire.