Business News
Xerox Reports Second-Quarter 2009 Earnings
Thursday 23. July 2009 - Earnings per share of 16 cents; Operating cash flow of $609 million, $1.2 billion cash balance; 40.2 percent gross margin, increase of 1 point; Revenue impacted by weak global economy
Xerox Corporation (NYSE: XRX) announced today second-quarter 2009 results that include earnings per share of 16 cents and $609 million in operating cash flow.
“During the second quarter, we exceeded our expectations for EPS and cash flow, reflecting our disciplined approach to operational improvements across the board,” said Ursula M. Burns, Xerox chief executive officer. “Gross margin and cash are up; expenses are down – all key factors to our strong financial position that is serving us well during this tough economy.
“At the same time, our industry continues to face challenges from the decline in enterprise spending on technology. We have seen sequential improvement with revenue up 5 percent from the first quarter. However, assuming current economic conditions persist, we expect revenue will remain under pressure during the balance of this year,” she added.
Total revenue of $3.7 billion was down 18 percent from second-quarter 2008 including a 5 point negative impact from currency. Post-sale and financing revenue was down 14 percent, or 8 percent in constant currency. Equipment sale revenue declined 29 percent, or 25 percent in constant currency. The revenue decline is largely due to continued spending constraints in the overall business environment, which is delaying purchasing decisions for new technology and slowing demand for document-related supplies.
“In this cost-conscious environment, our clients are responding to Xeroxs managed print services that reduce document costs by up to 30 percent, and to the value we provide through innovation like the Xerox ColorQube solid ink system that cuts the cost of color pages by up to 62 percent,” noted Burns. “Xeroxs value proposition along with the breadth of our offerings for businesses of any size, expanded distribution, and global account management gives us confidence in the strength of our long-term competitive position.”
Second-quarter operating cash flow of $609 million was $167 million higher than prior year driven by working capital improvements. Following this strong performance, the company raised its expectations for full-year operating cash flow to $1.5 billion from $1.3 billion. Xerox ended the second quarter with a cash balance of $1.2 billion, and total debt was down $347 million through the first half of the year. Xerox plans to reduce overall debt by $1 billion this year.
Gross margin was 40.2 percent in the second quarter, an increase of one point from the prior year and up 1.3 points from the first quarter of this year. Second-quarter selling, administrative and general (SAG) expenses were down year over year by $157 million and SAG as a percent of revenue was 27.2 percent.
Xerox expects third-quarter 2009 earnings per share in the range of 10 cents to 12 cents, delivering full-year 2009 earnings per share of 50 cents to 55 cents.
Note: 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.
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 managements 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; and other factors that are set forth in the “Risk Factors” section, the “Legal Proceedings” section, the “Managements Discussion and Analysis of Financial Condition and Results of Operations” section and other sections of our Quarterly Report on Form 10-Q for the quarter ended March 31, 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.