OPERATIONAL RESULTS SIGNIFICANTLY EXCEED EXPECTATIONS;
COMPANY RETURNS TO FULL-YEAR PROFITABILITY
"Our customers are responding, our leaner, faster operations are delivering positive results and Xerox is building momentum in the marketplace."
STAMFORD, Conn., Jan. 28, 2003 Delivering another quarter of improved performance, Xerox Corporation (NYSE: XRX) announced today a return to full-year profitability and 2002 fourth-quarter earnings that reflect increased demand in key markets and strong operational results.
The company reported fourth-quarter earnings of 1 cent per share, including restructuring charges of 34 cents per share and a one-time tax benefit of 11 cents per share related to the completion of a tax audit. Excluding restructuring and the tax gain, the fourth-quarter results reflect earnings of 24 cents per share - evidence of the sustainability of Xerox¹s strengthened business model and competitive portfolio of products and services.
Disciplined management of the balance sheet resulted in fourth quarter operating cash flow of $634 million. Additional finance receivable securitizations also contributed to an increase in Xerox¹s worldwide cash position, which was $2.9 billion at year-end.
"Xerox¹s aggressive efforts in transforming its business, generating strong operating cash flow and investing in new technology is all about building value for customers and shareholders," said Anne M. Mulcahy, Xerox chairman and chief executive officer. "We continue to demonstrate through precise execution and market focus that this strategy is working. Our customers are responding, our leaner, faster business model is delivering positive performance and Xerox is building momentum in the marketplace."
Revenue from equipment sales trended positively in the fourth quarter due to customer demand for the 17 new products launched in 2002. The fourth-quarter equipment sale decline of 2 percent was a significant sequential improvement from the 9-percent decline in the third quarter of 2002. Total revenue for the fourth quarter was $4.25 billion, a year-over-year decline of 3 percent.
"Xerox¹s fourth quarter results demonstrate exceptional operational performance and increased revenue in important markets, including office multifunction, production color, and monochrome production publishing," said Mulcahy. "Despite continued weakened global economies, customers recognize the value of Xerox¹s innovative, integrated technology and services, which enable more efficient work processes and lower cost, higher quality document management."
Mulcahy noted that the company¹s investment in advanced color technology resulted in a 10 percent year-over-year increase in total color revenue, largely due to the success of Xerox¹s DocuColor 1632, 2240, and 6060 production color series. Accelerated demand for Xerox¹s Document Centre 500 series contributed to a strong revenue increase in the growing market of office digital multifunction devices. And, the company¹s DocuTech family - Xerox¹s flagship production publishing system - continued to lead the market, driving an increase in Xerox¹s monochrome production publishing business.
For the fourth-quarter, gross margins were 43.9 percent, a year-over-year increase of 2.5 percentage points. Selling, administrative and general costs decreased $49 million or 4 percent from fourth quarter 2001.
Xerox also highlighted several recent customer wins that represent new business, competitive knockouts and renewals:
… Lloyds TSB recently signed two agreements for Xerox to manage the European bank¹s annual $46 million document spend of its group marketing operations and to manage up to seven digital print centers. Lloyds TSB¹s expanded relationship with Xerox is expected to deliver about $10 million in annual savings.
… Building on a strong relationship with Xerox as its document management services provider, Airborne Express recently upgraded its offices with the purchase of 350 Xerox Document Centre digital multifunction systems.
… UnitedHealth Group, the largest healthcare services organization in the U.S., called on Xerox to help manage its extensive human resources records as UnitedHealth migrates to a paperless Internet environment. Xerox is deploying an integrated solution that leverages its expertise in document imaging and repository services.
… First Bank has engaged Xerox for continued managed services and document solutions in an agreement that calls for the replacement of over 300 competitive products with Xerox Document Centre digital multifunction systems as First Bank shifts to an integrated network enterprise.
Commenting on the first quarter of 2003, Mulcahy said, "We expect that our expanded product, solutions and services portfolio will continue to drive modest improvement in year-over-year equipment sale trends. The flow through from our accelerated cost reductions in the fourth quarter will further strengthen our bottom line."
Full-Year 2002 Results
For 2002, Xerox delivered a return to full-year profitability. Income for the full year was $91 million or 2 cents per share, including full-year after-tax restructuring charges of $470 million or 58 cents per share. Revenue in 2002 was $15.8 billion, compared with $17 billion in 2001.