Xerox Announces Third Quarter Earnings

Xerox has announced third-quarter earnings of 5 cents per share.

Xerox has announced third-quarter earnings of 5 cents per share, which includes previously announced charges of 12 cents per share related to litigation matters and other items as well as a restructuring charge of 1 cent per share.

Excluding these items, Xerox delivered adjusted earnings per share of 18 cents.

Xerox also announced plans to repurchase up to $500million of the company's common stock.

'We met expectations by delivering another quarter of positive performance with revenue growth and earnings expansion,' said Anne M Mulcahy, Xerox chairman and chief executive officer.

'Xerox's third-quarter results reflect the strength of our digital portfolio, especially in colour where our industry-leading technology delivered 22 per cent revenue growth,' she added, citing strong sales of the company's DocuColor multifunction devices and iGen3 Digital Production Press.

'These digital systems combined with document management services flow through to boost our annuity revenue, continuing a positive trend that fuels total revenue growth.

'Our resources are aligned around a solid growth strategy - and the strategy is working.

'Just as important, the strength of our financial position gives us flexibility to compete effectively, invest in innovation and deliver a return to shareholders through initiatives like the share repurchase programme'.

In the third quarter, total revenue of $3.8billion grew 1 per cent year over year.

Equipment sales increased 2 per cent.

Post-sale and financing revenue, which represents more than 70 per cent of the company's total revenue, grew 1 per cent as the revenue stream from digital products offset declines from the company's older light-lens technology.

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 declined 1 per cent in the third quarter.

Production equipment sales growth of 1 per cent only partially offset a decline in production post-sales and financing revenue.

Production colour installs grew 5 per cent reflecting strong placements of the iGen3.

Installs of production monochrome systems grew 21 per cent largely due to the success of the Xerox 4110 light production system.

In Xerox's office business, which provides technology and services for workgroups of any size, equipment sales declined 1 per cent and total revenue grew 2 per cent.

Equipment sales revenue was impacted by product mix with the company selling a greater proportion of lower-priced units compared to the third quarter of last year.

Installs of digital office monochrome systems were up 21 per cent reflecting increased placements of Xerox WorkCentre desktop multifunction systems.

In office colour, installs of multifunction systems were up 56 per cent due to the success of the recently launched DocuColor 240/250 systems, and activity remained strong in installs of office colour printers.

Selling, administrative and general expenses decreased $25 million year over year and were 26.9 per cent of revenue in the third quarter, a decline of 1 percentage point from the third quarter of last year.

Gross margins were 41.3 per cent, a sequential improvement from the second quarter of this year and down about 1 point year over year.

Xerox closed the quarter with operating cash flow of $162million and a cash and short-term investments balance of $1.6billion.

Through the third quarter of this year, the company has generated close to $800million in operating cash flow.

Debt was down $3.3billion year over year and declined by about $700million from the second quarter of this year.

In a related announcement today, Xerox said its strong financial position prompted the board of directors to authorise the repurchase of up to $500million of the company's common stock.

Xerox's first stock buyback plan in nearly eight years, the company will use its healthy cash balance to repurchase stock over the next 12 months primarily through open-market purchases.

For the fourth quarter of 2005, Mulcahy said she expects earnings in the range of 25-29 cents per share, which include anticipated additional restructuring charges of 5 cents per share.

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