- 20 cents adjusted EPS - excludes tax settlement and restructuring
- Total revenue up 2 per cent
- Equipment sales up 4 per cent
- Revenue from colour up 17 per cent
- $290 million operating cash flow
UXBRIDGE, UK. July 25, 2005 – Xerox announced today second-quarter earnings per share of 40 cents, including a 33 cents per share gain from a recent IRS tax settlement, which was partially offset by restructuring charges of 13 cents per share.
Equipment sales in the second quarter increased 4 per cent year over year, and total revenue of $3.9 billion increased 2 per cent. Both equipment sales and total revenue included a currency benefit of 2 percentage points. The overall post-sale trend improved as the revenue stream from new digital systems and services offset declines from the company’s older light-lens technology.
“Xerox’s investment in innovation strengthened top-line results in the second quarter with our industry-leading colour technology driving equipment sale growth,” said Anne M. Mulcahy, Xerox chairman and chief executive officer.
Gross margin of 39 per cent was lower than expected due to a change in the company’s traditional product mix, which impacted net income in the quarter. The shift in product mix is primarily due to increased sales activity for desktop office products as well as light production and colour systems.
“These equipment sales will drive future post-sale gains, and, at the same time, we’re adjusting our business model to respond to the resulting pressure on margins,” added Mulcahy. “We remain confident that these actions and increased sales of new technology – 25 new products launched in the second quarter – coupled with growth from Xerox Global Services provide the marketplace momentum for strong second-half performance.”
Revenue from colour products grew 17 per cent in the second quarter. Colour is a key driver of Xerox’s growth strategy as the increasing volume of pages printed on the company’s colour systems flows through to post-sale revenue. Only 3 per cent of the total pages produced in businesses today are printed on colour devices. Xerox expects new colour services and technologies to drive that number to 10 per cent of pages by 2008, fueling a $22 billion market opportunity.
Xerox’s production business provides commercial printers and document-intensive industries with high-speed digital technology that enables on-demand, personalised printing. Total production revenue was flat year over year. Production equipment sale growth of 3 per cent only partially offset a decline in production post-sale and financing revenue. Second-quarter install activity for production monochrome systems increased 1 per cent primarily due to the success of the Xerox 4110 light production system, which offset declines in activity for high-end production monochrome systems. Production colour installs grew 18 per cent largely due to strong placements of the Xerox iGen3® Digital Production Press and the DocuColor® 8000 Digital Press. In May, Xerox announced the DocuColor 7000 Digital Press, further solidifying the company’s production portfolio as the broadest in the industry.
In Xerox’s office business, which provides technology and services for workgroups of any size, equipment sales were up 7 per cent and total revenue grew 2 per cent. Activity was exceptionally strong in the second quarter with office colour multifunction systems up 69 per cent and office colour printing activity up 155 per cent. Office monochrome activity was up 26 per cent driven by increased demand for Xerox WorkCentre® desktop multifunction systems.
In late June, Xerox announced 24 office products, software and services that target a $60 billion market. With the addition of these products, 95 per cent of Xerox’s office product line has been completely refreshed over the past 24 months. It remains the industry’s most comprehensive, serving every segment of the business market.
The company reported second-quarter selling, administrative and general expenses of 26.7 per cent of revenue, a modest improvement from the second quarter of last year.
In the second quarter, Xerox generated operating cash flow of $290 million after contributing $230 million to its primary U.S. pension plan. The company closed the quarter with a cash and short-term investments balance of $2.1 billion. Debt was down $2.1 billion year over year and down $1.5 billion from the first quarter of this year.
For the third quarter of 2005, Mulcahy said she expects earnings in the range of 16-18 cents per share, which includes anticipated additional restructuring charges of 1 cent per share.
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About Xerox Europe
Xerox Europe, the European operations of Xerox Corporation, markets a comprehensive range of Xerox products, solutions and services, as well as associated supplies and software. Its offerings are focused on three main areas: offices from small to large, production print and graphic arts environments, and services that include consulting, systems design and management, and document outsourcing.
Xerox Europe also has manufacturing and logistics operations in Ireland, the UK and the Netherlands, and a research and development facility (Xerox Research Centre Europe) in Grenoble, France. For more information visit, www.xerox.com
Xerox® is a trademark of Xerox Corporation. All non-Xerox brands and product names are trademarks or registered trademarks of their respective companies.
Customer Contact
For information on Xerox products, call 0346 255 255 or visit www.xerox.nl
Media Contacts:
Kevin Perlmutter, Xerox Europe, tel: +44 (0) 1895 845 219, email: kevin.perlmutter@xerox.com
Kinross + Render (on behalf of Xerox), Will Hart/ Luica Mak/ Sophie Hemsworth, tel: +44 (0) 20 7592 3100, email: wh@kinrossrender.com / lm@kinrossrender.com / sh@kinrossrender.com
Mediacontacten Nederland:
Xerox (Nederland) B.V., Patty de Jong, Communications Manager, tel.: 0346 – 255 255,
email: patty.dejong@xerox.com
VerkroostPR (voor Xerox), Herman Verkroost, tel.: 030 – 229 20 05, email: hav@verkroostpr.nl