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Xerox 2Q meets forecasts
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July 22, 1999: 8:07 a.m. ET
But copier maker warns currency exchange could curb earnings growth
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NEW YORK (CNNfn) - Xerox Corp. Thursday posted a 13 percent jump in second quarter net income and a 15 percent increase in earnings per share, which met Wall Street expectations.
But the maker of digital printing products and copiers said currency exchange rates, particularly in Europe and Brazil, took a bite out of overall revenue growth, and warned that continuing weakness in the European exchange rates and in key Latin and Asian markets may curb earnings growth in the second half of the year.
"While we remain focused on improving pre-currency revenue growth and achieving mid- to high teens earnings-per-share growth, any continuation of the current weak European exchange rates together with ongoing weakness in Brazil and Japan, make this earnings growth a much more challenging objective for the remainder of the year," President and CEO Rick Thoman said.
For the quarter ended June 30, the Stamford, Conn.-based Xerox reported net income of $448 million, or 62 cents a diluted share. That's up from $395 million, or 54 cents a share, posted in the second quarter of 1998 -- excluding a $1.11 billion restructuring charge.
Revenue for the quarter rose 3 percent to $4.86 billion versus $4.74 billion a year ago. Excluding foreign currency exchange rates and Brazil -- where results were depressed due to that country's currency devaluation in January and economic weakness -- revenue grew 7 percent. Including Brazil, revenues prior to factoring in exchange rates rose 4 percent.
The company's operating profit margin was 14.3 percent, a 1.5-percentage-point improvement from a year earlier. And selling, administrative and general expenses represented 25.8 percent of revenue, a decline of 1.5 percentage points from the same period last year.
Among its business segments, document outsourcing revenue jumped 34 percent, digital product revenue increased 26 percent. But black-and-white light-lens copier revenue fell 20 percent, due to weakness in Brazil, pricing pressure and increased demand for digital copiers.
"Longer term, our growth will be driven by our expanding product, document outsourcing and solutions offerings as well as indirect distribution channels, and by realizing the ongoing benefits of the restructuring program and our productivity and expense controls," Thoman said.
Year-to-date results
For the first half of the year, Xerox's net income rose 13 percent to $791 million, or $1.09 per diluted share, compared with $697 million, or 96 cents a share, before the restructuring charge.
Revenue for the six-month period rose 1 percent to $9.16 billion.
Shares in Xerox (XRX) closed down 1-1/2 at 55-3/8 on Wednesday.
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