Xerox Reports Fourth-Quarter Earnings
Xerox Reports Fourth-Quarter Earnings
- Q4 GAAP earnings per share of 26 cents; adjusted EPS of 30 cents
- Revenue of $5.9 billion down 1 percent, flat constant currency
- Operating margin of 10.3 percent
- Operating cash flow of $1.8 billion; $2.6 billion for full-year 2012
NORWALK, Conn.--(BUSINESS WIRE)-- Xerox (NYS: XRX) announced today fourth-quarter 2012 results that include adjusted earnings per share of 30 cents. As planned, the company's fourth-quarter earnings include 5 cents of restructuring. Adjusted EPS excludes 4 cents related to amortization of intangibles, resulting in GAAP EPS of 26 cents.
In the fourth quarter, total revenue of $5.9 billion was down 1 percent or flat in constant currency. Revenue from the company's services business was up 7 percent and represented 52 percent of total revenue. Revenue from the company's document technology business, which represents 42 percent of revenue, was down 8 percent as economic and market conditions continued to put pressure on sales of document systems, supplies and related service.
"Strong growth in services and the consistent profitability of our document technology business generated significant operating cash flow and contributed to fourth-quarter earnings that met our expectations," said Ursula Burns, Xerox chairman and chief executive officer.
"Throughout 2012, we focused on scaling our services business and adjusting our business model to align with growth opportunities in the $600 billion market we serve," she added. "Our fourth-quarter results reflect steady progress. We increased our services segment margin by 0.9 points while growing business process outsourcing revenue by 8 percent, IT outsourcing by 15 percent and document outsourcing by 2 percent. In document technology, our fourth-quarter segment margin of 12.3 percent improved, reflecting effective execution in reducing our cost base and maximizing profitability."
Fourth-quarter operating margin was up 0.3 points to 10.3 percent. Gross margin was 31.5 percent, and selling, administrative and general expenses were 18.5 percent of revenue.
The company generated $1.8 billion in cash from operations during the fourth quarter, which includes $269 million of net cash from the sale of certain finance receivables.
For first-quarter 2013, Xerox expects GAAP earnings of 19 to 21 cents per share and adjusted EPS of 23 to 25 cents per share. The company reiterated its full-year 2013 guidance of GAAP earnings per share in the range of 94 cents to $1.00, and adjusted EPS of $1.09 to $1.15. Xerox expects to generate operating cash flow of $2.1 billion to $2.4 billion in 2013.
Full-year 2012 results include:
- GAAP earnings per share of 88 cents per share; adjusted earnings per share of $1.03.
- Total revenue of $22.4 billion, down 1 percent or flat in constant currency from full-year 2011. Total services revenue of $11.5 billion, up 6 percent or up 7 percent in constant currency. Total document technology revenue of $9.5 billion, down 8 percent or down 6 percent in constant currency.
- Operating margin of 9.3 percent, down 0.5 points from full-year 2011.
- Operating cash flow of $2.6 billion, up $600 million from full-year 2011.
- Net income of $1.2 billion, adjusted net income of $1.4 billion, down 11 percent.
- Share repurchase of $1.05 billion.
With sales approaching $23 billion, Xerox (NYS: XRX) is the world's leading enterprise for business process and document management. Its technology, expertise and services enable workplaces - from small businesses to large global enterprises - to simplify the way work gets done so they operate more effectively and focus more on what matters most: their real business. Headquartered in Norwalk, Conn., Xerox offers business process outsourcing and IT outsourcing services, including data processing, healthcare solutions, HR benefits management, finance support, transportation solutions, and customer relationship management services for commercial and government organizations worldwide. The company also provides extensive leading-edge document technology, services, software and genuine Xerox supplies for graphic communication and office printing environments of any size. The 140,000 people of Xerox serve clients in more than 160 countries. For more information, visit http://www.xerox.com, http://news.xerox.com or http://www.realbusiness.com. For investor information, visit http://www.xerox.com/investor.
Non- GAAP Measures:
This release refers to the following non-GAAP financial measures:
- Adjusted EPS (earnings per share) for the fourth quarter and full-year 2012 as well as for the first quarter and full-year 2013 guidance that excludes the amortization of intangible assets.
- Operating margin for the fourth quarter and full-year 2012 that excludes certain expenses.
- Constant Currency revenue growth for the fourth quarter and full-year 2012 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 and their reconciliation to the reported GAAP measure.
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 management's 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: changes in economic conditions, political conditions, trade protection measures, licensing requirements and tax matters in the United States and in the foreign countries in which we do business; changes in foreign currency exchange rates; actions of competitors; our ability to obtain adequate pricing for our products and services and to maintain and improve cost efficiency of operations, including savings from restructuring actions; the risk that unexpected costs will be incurred; our ability to expand equipment placements; the risk that subcontractors, software vendors and utility and network providers will not perform in a timely, quality manner; the risk that individually identifiable information of customers, clients and employees could be inadvertently disclosed or disclosed as a result of a breach of our security; our ability to recover capital investments; development of new products and services; our ability to protect our intellectual property rights; interest rates, cost of borrowing and access to credit markets; the risk that multi-year contracts with governmental entities could be terminated prior to the end of the contract term; reliance on third parties for manufacturing of products and provision of services; our ability to drive the expanded use of color in printing and copying; the outcome of litigation and regulatory proceedings to which we may be a party; and other factors that are set forth in the "Risk Factors" section, the "Legal Proceedings" section, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other sections of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2012, June 30, 2012 and September 30, 2012 and our 2011 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.
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|Condensed Consolidated Statements of Income (Unaudited)|
|Three Months Ended||Year Ended|
|December 31,||December 31,|
|(in millions, except per-share data)||2012||2011||% Change||2012||2011||% Change|
|Outsourcing, service and rentals||3,958||3,816||4||%||15,215||14,868||2||%|
|Costs and Expenses|
|Cost of sales||1,192||1,314||(9||%)||4,362||4,697||(7||%)|
|Cost of outsourcing, service and rentals||2,819||2,672||6||%||10,802||10,269||5||%|
|Equipment financing interest||45||55||(18||%)||198||231||(14||%)|
|Research, development and engineering expenses||160||179||(11||%)||655||721||(9||%)|
|Selling, administrative and general expenses||1,094||1,150||(5||%)||4,288||4,497||(5||%)|
|Restructuring and asset impairment charges||93||61||52||%||153||33|
|Amortization of intangible assets||82||139||(41||%)||328||398||(18||%)|
|Other expenses, net||71||54||31||%||256||322||(20||%)|
|Total Costs and Expenses||5,556||5,517||1||%||21,042||21,061||--|
|Income before Income Taxes & Equity Income(1)||367||447||(18||%)||1,348||1,565||(14||%)|
|Income tax expense||71||102||(30||%)||277||386||(28||%)|
|Equity in net income of unconsolidated affiliates||47||38||24||%||152||149||2||%|
|Less: Net income attributable to noncontrolling interests||8||8||-||28||33||(15||%)|
|Net Income Attributable to Xerox||$||335||$||375||(11||%)||$||1,195||$||1,295||(8||%)|
|Basic Earnings per Share||$||0.26||$||0.27||(4||%)||$||0.90||$||0.92||(2||%)|
|Diluted Earnings per Share||$||0.26||$||0.26||-||$||0.88||$||0.90||(2||%)|
|* Percent change not meaningful.|
(1) Referred to as "Pre-Tax Income" throughout the remainder of this document.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
|Three Months Ended||Year Ended|
|December 31,||December 31,|
Less: Net income attributable to noncontrolling interests
|Net Income Attributable to Xerox||$||335||$||375||$||1,195||$||1,295|
|Other Comprehensive (Loss) Income, Net:|
Translation adjustments, net
Unrealized (losses) gains, net
Changes in defined benefit plans, net
|Other Comprehensive Loss, Net||(681||)||(831||)||(511||)||(729||)|
Less: Other comprehensive loss, net attributable to noncontrolling interests
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