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Jul 25, 2013
Xerox reports second-quarter 2013 earnings
Xerox announced today second-quarter 2013 adjusted EPS of 27 cents, which excludes 4 cents related to the amortization of intangibles. GAAP EPS from continuing operations was 23 cents. Revenue was $5.4 billion, up 1 percent.

Revenue from the company's services business was up 5 percent, which includes 4 percent growth from business process outsourcing, 6 percent growth in document outsourcing and 13 percent growth from IT outsourcing. Services revenue represents 55 percent of Xerox's total revenue.

"Through the breadth of our outsourcing services and innovative technology, today's Xerox simplifies the way work gets done for organizations around the world," said Ursula Burns, Xerox chairman and chief executive officer. "Our clients are increasingly expanding their partnerships with us to improve the effectiveness of their operations. As a result, the total contract value of services signings was up 40 percent in the second quarter, our pipeline grew 10 percent and our BPO and ITO contract renewal rate was 95 percent - strong indicators of a sound strategy that fuels the success of our business for the long term."

Revenue from the company's document technology business was down 5 percent year over year and improved sequentially from the first quarter of this year. The company benefitted from the full rollout of its ConnectKeyTM platform of printers and multifunction devices, expanded distribution through channel partners and increased demand for its digital production presses. During the quarter, Xerox signed and began installing its largest order ever for high-speed color presses, strengthening the company's market leadership. Document technology revenue represents 42 percent of total revenue.

Second-quarter operating margin of 9.4 percent was up 2.0 points sequentially, down 0.5 points year over year. Gross margin was 31.4 percent. Selling, administrative and general expenses were 19.3 percent of revenue.

The company generated $533 million in operating cash flow, and remains on track to generate $2.1 billion to $2.4 billion in full-year operating cash flow.

Added Burns, "Steady progress in growing revenue combined with a disciplined focus on operational improvements resulted in strong earnings and cash generation, positioning us well to deliver on our expectations for the full year."

For third-quarter 2013, Xerox expects GAAP earnings from continuing operations of 20 to 22 cents per share and adjusted EPS of 24 to 26 cents per share.

The company continues to expect full-year 2013 GAAP earnings per share from continuing operations in the range of 94 cents to $1.00, and adjusted EPS of $1.09 to $1.15.

* Xerox recently completed the sale of its North American paper business to Domtar Corporation and entered into an agreement to sell its European paper business to Antalis. Beginning with the second quarter 2013, the company is reporting results from these businesses as discontinued operations. Prior period results have been restated to reflect this change.

The following table summarizes the effects from Xerox's discontinued operations in the second-quarter 2013:

     

Second Quarter 2013

 

   

Revenue
(in millions)

    EPS

Continuing Operations

   

$

5,402

   

$

0.23

 

Discontinued Operations*

     

134

     

(0.02)

 

Results including Discontinued Operations

   

$

5,536

   

$

0.21

 

* - Revenue from discontinued operations reflects 2 months of North American Paper
revenue as a result of the completion of the sale to Domtar on May 31, 2013.

- EPS from discontinued operations reflects a 2 cent loss on disposal.
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