Xerox Reports 13% Growth in Revenue for 1st Quarter
Monday, April 21, 2008
Press release from the issuing companyNORWALK, Conn., April 18, 2008 – Xerox Corporation announced today a first-quarter loss of 27 cents per share, which includes the previously announced litigation charge of 54 cents per share. Excluding this charge, the company reported adjusted earnings per share of 27 cents, up from 24 cents reported in the first-quarter of 2007.
"We're investing in sales, expanding our distribution and winning in the marketplace through technology and services offered at competitive prices. This quarter we saw our investments flow through to improved install activity – activity that fuels our profitable annuity stream," said Anne M. Mulcahy, Xerox chairman and chief executive officer. "However, these marketing investments as well as the mix of products sold put pressure on earnings this quarter. While the decline in gross margin was offset by a lower tax rate – delivering EPS in line with our expectations – we're focused on operational improvements to drive further earnings expansion."
Total revenue of $4.3 billion grew 13 percent in the quarter with post-sale revenue up 11 percent; this annuity stream represents more than 70 percent of total revenue. Equipment sale revenue was up 18 percent. The company's revenue includes the benefit of its acquisition of Global Imaging Systems in May 2007. Total revenue and post-sale revenue included a currency benefit of 4 percentage points; equipment sale revenue included a 5 point currency benefit.
Xerox technology is accelerating the adoption of digital color printing in businesses and commercial print enterprises. Revenue from color grew 13 percent in the first quarter and represents 40 percent of Xerox's total revenue, up 3 points from the first quarter of 2007. Xerox color devices print the highest volume of pages in the industry – producing more than 40 billion pages last year. In the first quarter, the number of color pages grew 32 percent, and now represent 14 percent of total pages, up 3 points from the prior year. Color performance excludes Global Imaging Systems results.
Xerox document management services help businesses simplify work processes, manage office technology and in-house print shops, digitize paper files, create digital archives and much more. In the first quarter, Xerox Global Services generated about $850 million in annuity revenue, up 8 percent from the prior year.
Xerox's production business provides commercial printers and document-intensive industries with high-speed digital printing and services that enable on-demand, personalized printing. Total production revenue increased 6 percent in the first quarter, including a 5 point currency benefit. Production color installs grew 5 percent. Installs of production black-and-white systems grew 8 percent due to demand for the Xerox Nuvera EA and Xerox Nuvera 288 digital presses and continuous feed systems.
Through expanded channels of distribution and competitive offerings for businesses of any size, Xerox continues to drive the demand for color in the office with installs of color multifunction systems up 40 percent. Total office revenue was up 16 percent in the first quarter, including a 4 point benefit from currency. Installs of the company's black-and-white multifunction devices increased 35 percent.
"With the industry's broadest portfolio of document technology, our growth initiatives are aimed at increasing distribution, bringing the quality of the Xerox brand to more businesses of any size," said Mulcahy. Last year, Xerox acquired Global Imaging Systems, gaining access to 200,000 new small and mid-size businesses. Since then, Global Imaging has expanded its footprint, acquiring five more office technology dealers that now sell Xerox products. Building on this strategy to grow channels regionally, Xerox this week announced its pending purchase of Veenman, the largest office technology distributor in the Netherlands.
During the first quarter, the combination of product mix, pricing and currency-related costs resulted in gross margin of 39.3 percent, down 1.3 points from the prior year. Investments in marketing and selling led to a 1 point increase in selling, administrative and general expenses of 25.9 percent of revenue.
The company generated $52 million in operating cash flow and repurchased $334 million in Xerox shares in the first quarter. Since launching its stock buyback program in October 2005, Xerox to-date has repurchased 161 million shares or 15 percent of outstanding shares.
In March, Xerox received preliminary court approval to settle a securities lawsuit that dated back to 2000. While not admitting any wrongdoing, Xerox agreed to settle to avoid the time, expense and uncertainty of litigation. The company took an after-tax charge of $491 million, or 54 cents per share, in the first quarter to cover the settlement and reserve for other pending securities-related cases.
Xerox expects second-quarter 2008 earnings in the range of 23 to 25 cents per share, including a restructuring charge of 5 cents per share.
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