Xerox Announces Fourth Quarter Earnings Per Share of 41 Cents; Plans First Quarter Restructuring Charge
"There are encouraging reasons for renewed confidence"
STAMFORD, Conn., Jan 25, 2000 -- Xerox Corporation (NYSE:XRX) today announced fourth quarter earnings per share of 41 cents. The company also announced that it will take a substantial restructuring charge, most likely in the first quarter.
"While our fourth quarter was a major disappointment, we've made substantial progress on our key issues and -- while we remain realistic about the challenges ahead -- there are encouraging reasons for renewed confidence," said Rick Thoman, Xerox president and CEO.
"We have definitely turned the corner in resolving our customer administration issues in the United States, as demonstrated by a leading indicator -- our substantial improvement in U.S. receivables performance. However, there are some lagging impacts that will continue to affect earnings," said Thoman. "Additionally, while our sales people will need time to cement new customer relationships, future results will benefit from completion of the sales force realignment on an industry basis. Finally, we believe the Y2K effect is largely behind us, results from Fuji Xerox have improved and there are signs of some strengthening in Brazil. We fully expect that these positive developments will become significant, especially during the second half of 2000."
Xerox reiterated its previously stated outlook that some issues could reduce earnings in the first quarter proportionately to the fourth quarter decline and, to a lesser extent, in the second quarter, followed by meaningful growth later in the year.
Thoman also said the company would announce this year significant new technologically innovative products and solutions designed to build marketplace momentum and enhance the company's position in the digital office. These capabilities will also drive revenue in three strategic fast-growth areas: production-publishing solutions, the document outsourcing business, and small and home office-focused inkjet printing and network laser printing -- enhanced by the acquisition of the Tektronix color printing division, which was completed January 1.
As a result of an ongoing, comprehensive review by senior executives to identify substantial additional operational productivity and cost-saving opportunities that can be brought to the bottom line, the company will announce a series of actions and take a substantial restructuring charge, most likely in the first quarter. "Virtually everything is on the table, with the exception of direct sales, and research and development," said Thoman. "We're counting on our sales force to come through -- as they have for us every other time this company has faced challenges -- and research is the engine that maintains our leadership edge in products and services."
Fourth Quarter Review:
Fourth quarter results were generally consistent with expectations disclosed last month. Pre-currency revenues in the 1999 fourth quarter were flat year over year, excluding Brazil. Including Brazil, where revenues declined substantially due to the devaluation and economic weakness, fourth quarter revenues declined 3 percent from the 1998 fourth quarter. Including the unfavorable effects of European currency, total 1999 fourth quarter revenues of $5.4 billion declined 6 percent compared with $5.8 billion in the 1998 fourth quarter.
Income of $294 million in the 1999 fourth quarter declined 52 percent year over year, reflecting primarily the revenue decline and gross margin deterioration, which were partially offset by lower selling, administrative and general expenses and reduced research and development spending.
Fourth quarter 1999 revenue and income reflected reduced revenue and profits from Brazil, lower production printing and publishing sales due to Y2K, the impact from the U.S. customer administration reorganization and issues related to the final phase of the salesforce realignment by industry, which was completed at the beginning of this month. Performance was also affected by increased
Despite revenue shortfalls in several key areas in the fourth quarter, Xerox highlighted several positive results, including: record revenues and installations of the Document Centre digital multifunction family, outstanding sales of the newly introduced DocuColor 12 and Document Centre ColorSeries 50 products, and significant growth in laser and inkjet printers sold through indirect channels. Revenue from digital products in the 1999 fourth quarter reached 57 percent of total revenue, compared with 52 percent in the 1998 fourth quarter. The Fuji Xerox earnings contribution reflected improved business performance as well as favorable currency translation.
Full Year Results:
For the full year 1999, diluted earnings per share of $1.96 and income of $1.4 billion from continuing operations decreased 16 percent from $2.33 and $1.7 billion, respectively, before the 1998 restructuring program charge. Including the 1998 restructuring program charge and a 1998 discontinued operations loss, Xerox reported 1998 diluted earnings per share of 52 cents and net income of $395 million.
Revenues in 1999 were $19.2 billion, compared with $19.4 billion in 1998.
1999 Q4 Earnings Conference Call in Real Audio Available Jan. 25th After 2:00 pm EST |
