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Xerox Q1 results beat estimates

Monday, April 26, 2010

Press release from the issuing company

Norwalk, Conn. – Xerox Corporation announced today first-quarter 2010 results that include adjusted earnings per share of 18 cents and $375 million in operating cash flow. Adjusted EPS excludes 22 cents from previously disclosed restructuring charges, intangibles, acquisition-related costs and other discrete items, resulting in a GAAP loss of 4 cents per share.

“We started the year strong with the successful acquisition of ACS and solid performance in revenue, operational improvements and cash generation,” said Ursula Burns, Xerox chief executive officer. “As a result, earnings reflect the benefit of our market leadership and expanded offerings in business process and document management.”

Total first-quarter revenue of $4.7 billion was up 33 percent including a 3 point currency benefit. On a pro-forma basis, with ACS in the company’s 2009 results, total revenue grew 5 percent. Revenue from technology, which represents the sale of document systems as well as the supplies, technical service and financing of products, was up 6 percent including a 3 point currency benefit. Total install activity for Xerox equipment was up 17 percent. Revenue from services grew 3 percent on a pro-forma basis, including a 1 point currency benefit, and represents the company’s business process, IT and document outsourcing offerings.

“Our results reflect improving demand for Xerox’s document technology in developing markets and from small and mid-size businesses. In addition, total color revenue grew 11 percent in the quarter with customers increasingly choosing Xerox color multifunction printers as a cost-effective way to get more for less,” said Burns. “Equipment sales are still under pressure for large enterprises and the graphic communications market. However, we’re seeing an improving trend in enterprises’ use of their existing devices, contributing to our annuity stream and indicating some economic stability in corporate environments.

“Annuity revenue is also significantly strengthened by our growing services portfolio with business process outsourcing up 8 percent on a pro-forma basis in the first quarter. Xerox’s annuity is now 83 percent of total revenue,” added Burns. “We’re on track with cost and revenue synergies from the acquisition. This progress coupled with marketplace momentum for our document technology positions us well to deliver continued revenue growth, strong cash and earnings expansion throughout the year.”

First-quarter gross margin was 36.1 percent and selling, administrative and general expenses were 23.3 percent of revenue. On a pro-forma basis, operating margin was up 1.5 points, driven by improvements in both gross margin and SAG as a percent of revenue.

Xerox expects second-quarter 2010 GAAP earnings in the range of 14 to 16 cents per share. Second-quarter adjusted EPS is expected to be 20 to 22 cents per share. Full-year GAAP earnings are expected to be 37 to 47 cents per share. Full-year adjusted EPS is expected to be at the high end of the company’s previous guidance of 75 to 85 cents per share.




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