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XEROX SECOND QUARTER NET INCOME DOWN 10 PERCENT

 STAMFORD, Conn., July 29 /PRNewswire/ -- Second quarter net income of Xerox Corporation (NYSE: XRX) was $112 million, or 96 cents a primary share, compared with $124 million, or $1.12 a primary share, in the corresponding 1992 period, the company reported today.
 Net income in the six months ended June 30 was $301 million, or $2.73 a primary share, compared with a loss of $405 million, or $4.56 a primary share, in the first half last year. The year-ago loss reflects the cumulative effect of changes in accounting related to retiree benefits and income taxes.
 Income from the core Xerox document processing business in the second quarter declined 10 percent to $111 million from $124 million a year ago and in the half-year income increased 4 percent to $236 million from $227 million.
 Document processing earnings per primary share in the second quarter were 95 cents, a decline of 15 percent from $1.12 a year earlier, and in the first half earnings per share were $2.07, an increase of 2 percent from $2.03.
 Second quarter income from insurance and other financial services was $1 million compared with a break-even quarter a year earlier. In the first half, income totaled $65 million, which included a $63 million gain from the sale of an asset management firm, against $10 million a year ago.
 Paul A. Allaire, Xerox chairman and chief executive officer, reported that the company's plan to disengage from its financial services businesses announced at the beginning of this year continues "on track."
 In connection with implementing the disengagement strategy, a letter of intent was signed this week to sell Furman Selz and discussions with state insurance regulators regarding the legal restructuring of Crum and Forster are proceeding well.
 "We anticipate that the approvals for the legal restructuring of Crum and Forster will be obtained shortly," said Allaire, "and sale of the Furman Selz businesses should close by early fall."
 Document Processing Results
 Revenues from document processing in the second quarter and first half were essentially unchanged from the corresponding 1992 periods. In the quarter, revenues were $3,537 million, compared with $3,553 million a year earlier. In the half-year, revenues were $6,835 million, against $6,858 million.
 Allaire said that "the economic environment in both the United States and Europe is causing customers to scale back spending on office equipment.
 "Excluding currency, document processing revenues grew 2 percent in the second quarter and first half. The revenue growth reflects the continued strength of annuity revenues from service, supplies, paper, rentals and financing of equipment purchases offset by lower revenue from sales of equipment.
 Second quarter revenues from the company's digital products, which accounted for 19 percent of total document processing revenues, were 17 percent higher pre-currency than in the comparable 1992 period.
 Allaire said that revenues from the Xerox DocuTech line of production publishers and the company's color products maintained excellent growth. However, he added, equipment sale revenues of the company's line of high-end electronic printers for the data center, which is a more mature market, declined, reflecting the weak worldwide economic environment.
 Revenues before currency from black-and-white copiers, which represent approximately two-thirds of total revenues, declined 1 percent in both the second quarter and half year.
 As announced May 17, second quarter Xerox sales of black-and-white copiers in the United States continued to be disrupted by a major change in the way the company's sales force is organized. The change is designed to better align sales coverage with the company's major markets and customer requirements.
 Document processing gross margins declined in the second quarter due to a shift in product mix toward low-end products which have lower margins, adverse currency and some pricing pressure, said Allaire.
 In addition, the Xerox chairman pointed out that Brazil is experiencing an acceleration in inflation and devaluation resulting in an increase of about $20 million in foreign exchange losses from balance sheet translation in the second quarter vs. a year ago.
 Allaire said that "our continued emphasis on expense control and cost reduction resulted in second quarter selling, general and administrative expenses being unchanged from the corresponding year-ago period before the effect of currency."
 In the latest second quarter, worldwide Xerox employment declined by 400 to bring the total employment reduction to 1,200 since Jan. 1.
 Chairman's Outlook
 "For the balance of 1993, we expect to see an increase in sales momentum in the U.S. as we realize the productivity benefits from our sales force realignment," Allaire said.
 Xerox continues to make important investments in technology and, in 1993, is announcing a number of significant new products. For example, seven new copiers with enhanced features, including three with color capabilities, have been introduced this year as part of the company's program to continually respond to customer requirements with the broadest, most competitive product line available.
 Allaire said that the European economic environment is expected to remain weak in the second half, business confidence in the U.S. is likely to continue to adversely impact capital spending for office equipment and, if exchange rates remain at current levels, currency will put pressure on earnings.
 "The external environment presents considerable challenge," Allaire said. "Nevertheless, we are still striving for full year document processing income growth and are continuing to focus on cost reduction throughout the company."
 NOTE: Total common shares used to calculate primary earnings per share were 99.1 million in the second quarter and first half of 1993 compared with 96.8 million in the corresponding 1992 periods.
 XEROX CORPORATION
 Financial Summary
 (In millions, except per-share data)
 Second Quarter Pct.
 1993 1992 Growth
 Revenues:
 Document Processing $ 3,537 $ 3,553 --
 Net Income:
 Document Processing $ 111 $ 124 (10)
 Insurance and Other Financial Services 1 -- (A)
 Net Income $ 112 $ 124 (10)
 Primary Earnings per Share:
 Document Processing $ .95 $ 1.12 (15)
 Net Income $ .96 $ 1.12 (14)
 Fully Diluted Earnings per Share:
 Document Processing $ .94 $ 1.08 (13)
 Net Income $ .94 $ 1.08 (13)
 First Half Pct.
 1993 1992 Growth
 Revenues:
 Document Processing $ 6,835 $ 6,858 --
 Net Income (Loss):
 Document Processing $ 236 $ 227 4
 Insurance and Other Financial Services 65 10 (A)
 Income from Continuing Operation 301 237 27
 Discontinued Operations -- 122 (A)
 Cum. Effect of Changes in Accounting
 Principles -- (764) (A)
 Net Income (Loss) $ 301 $ (405) (A)
 Primary Earnings (Loss) per Share:
 Document Processing $ 2.07 $ 2.03 2
 Net Income $ 2.73 $ (4.56) (A)
 Fully Diluted Earnings (Loss) per Share:
 Document Processing $ 2.02 $ 1.98 2
 Net Income $ 2.61 $ (3.85) (A)
 (A) -- Calculation not meaningful.
 XEROX CORPORATION
 Statement of Income
 With IOFS on an Equity Basis
 (In millions, except per-share data)
 Second Quarter Year-To-Date
 Pct. Pct.
 1993 1992 Growth 1993 1992 Growth
 Revenues:
 Sales $1,730 $1,776 (3) $3,231 $3,344 (3)
 Service and rentals 1,496 1,476 1 2,993 2,926 2
 Finance income 261 248 5 539 505 7
 Equity in income
 of unconsolidated
 affiliates and
 other income 50 53 (6) 72 83 (13)
 Total Revenues 3,537 3,553 -- 6,835 6,858 --
 Costs and Expenses:
 Cost of sales 995 966 3 1,851 1,819 2
 Cost of service and
 rentals 760 743 2 1,513 1,504 1
 Research and development
 expenses 235 246 (4) 446 448 --
 Selling, administrative
 and general expenses 1,121 1,147 (2) 2,218 2,259 (2)
 Interest expense 136 136 -- 285 271 6
 Other, net 58 46 23 65 64 --
 Total Costs and Exps. 3,305 3,284 1 6,378 6,365 --
 Income before Income Taxes
 and Minorities' Ints. 232 269 (14) 457 493 (7)
 Income Taxes 84 104 (19) 160 197 (19)
 Minorities' Interest in
 Earnings of Subsidiaries 37 41 (10) 61 69 (11)
 Income from Document
 Processing Operations 111 124 (10) 236 227 4
 Equity in income of
 Insurance and Other
 Financial Services
 operations 1 -- (A) 65 10 (A)
 Income from Continuing
 Operations $ 112 $ 124 (10) $ 301 $ 237 27
 Discontinued Operations -- -- -- -- 122 (A)
 Cumulative Effect of
 Changes in Accounting
 Principles -- -- -- -- (764) (A)
 Net Income (Loss) $ 112 $ 124 (10) $ 301 $ (405) (A)
 Document Processing
 Earnings Per Share
 Income from Document
 Processing Operations $ 111 $ 124 (10) $ 236 $ 227 4
 Primary Earnings:
 Preferred dividends
 net of tax benefit (15) (15) -- (31) (30) --
 Income available for
 common $ 96 $ 109 (11) $ 205 $ 197 5
 Adjusted average shares
 outstanding 99.1 96.8 2 99.1 96.8 2
 Earnings per share $ .95 $ 1.12 (15) $ 2.07 $ 2.03 2
 Fully Diluted Earnings:
 Preferred dividends
 net of tax benefit (7) (7) -- (15) (13) 8
 Income available for
 common $ 104 $ 117 (11) $ 221 $ 214 4
 Adjusted average shares
 outstanding 109.8 108.4 1 109.8 108.4 1
 Earnings per share $ .94 $ 1.08 (13) $ 2.02 $ 1.98 2
 (A) -- Calculation not meaningful.
 -0- 7/29/93
 /CONTACT: Thomas C. Abbott of Xerox, 203-968-3378/
 (XRX)


CO: Xerox Corporation ST: Connecticut IN: SU: ERN

GK -- NY001 -- 7064 07/29/93 07:06 EDT
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Date:Jul 29, 1993
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