Xerox Reports Q3 Earnings, Announces $500 Million Stock Repurchase
Press release from the issuing company
STAMFORD, Conn.--Oct. 21, 2005-- Xerox Corporation announced today third-quarter earnings per share of 5 cents. This includes previously announced charges of 12 cents per share related to litigation matters and other items as well as a restructuring charge of 1 cent per share. Excluding these items, Xerox delivered adjusted earnings per share of 18 cents.
Xerox also announced plans to repurchase up to $500 million of the company's common stock.
"We met expectations by delivering another quarter of positive performance with revenue growth and earnings expansion," said Anne M. Mulcahy, Xerox chairman and chief executive officer.
"Xerox's third-quarter results reflect the strength of our digital portfolio, especially in color where our industry-leading technology delivered 22-percent revenue growth," she added, citing strong sales of the company's DocuColor multifunction devices and iGen3 Digital Production Press. "These digital systems combined with document management services flow through to boost our annuity revenue, continuing a positive trend that fuels total revenue growth. Our resources are aligned around a solid growth strategy - and the strategy is working.
"As important, the strength of our financial position gives us flexibility to compete effectively, invest in innovation and deliver a return to shareholders through initiatives like the share repurchase program."
In the third quarter, total revenue of $3.8 billion grew 1 percent year over year. Equipment sales increased 2 percent. Post-sale and financing revenue, which represents more than 70 percent of the company's total revenue, grew 1 percent as the revenue stream from digital products offset declines from the company's older light-lens technology.
Xerox's production business provides commercial printers and document-intensive industries with high-speed digital technology that enables on-demand, personalized printing. Total production revenue declined 1 percent in the third quarter. Production equipment sale growth of 1 percent only partially offset a decline in production post-sale and financing revenue. Production color installs grew 5 percent reflecting strong placements of the iGen3. Installs of production monochrome systems grew 21 percent largely due to the success of the Xerox 4110 light production system.
In Xerox's office business, which provides technology and services for workgroups of any size, equipment sales declined 1 percent and total revenue grew 2 percent. Equipment sale revenue was impacted by product mix with the company selling a greater proportion of lower-priced units compared to the third quarter of last year. Installs of digital office monochrome systems were up 21 percent reflecting increased placements of Xerox WorkCentre desktop multifunction systems. In office color, installs of multifunction systems were up 56 percent due to the success of the recently launched DocuColor 240/250 systems, and activity remained strong in installs of office color printers.
Selling, administrative and general expenses decreased $25 million year over year and were 26.9 percent of revenue in the third quarter, a decline of 1 percentage point from third quarter of last year. Gross margins were 41.3 percent, a sequential improvement from second quarter of this year and down about 1 point year over year.
Xerox closed the quarter with operating cash flow of $162 million and a cash and short-term investments balance of $1.6 billion. Through the third quarter of this year, the company has generated close to $800 million in operating cash flow. Debt was down $3.3 billion year over year and declined by about $700 million from the second quarter of this year.
In a related announcement today, Xerox said its strong financial position prompted the board of directors to authorize the repurchase of up to $500 million of the company's common stock. Xerox's first stock buyback plan in nearly eight years, the company will use its healthy cash balance to repurchase stock over the next 12 months primarily through open-market purchases.
For the fourth quarter of 2005, Mulcahy said she expects earnings in the range of 25-29 cents per share, which include anticipated additional restructuring charges of 5 cents per share.
WhatTheyThink is the global printing industry's leading independent media organization with both print and digital offerings, including WhatTheyThink.com, PrintingNews.com and WhatTheyThink magazine versioned with a Printing News and Wide-Format & Signage edition. Our mission is to provide cogent news and analysis about trends, technologies, operations, and events in all the markets that comprise today’s printing and sign industries including commercial, in-plant, mailing, finishing, sign, display, textile, industrial, finishing, labels, packaging, marketing technology, software and workflow.