Xerox Reports Increases in Fourth-Quarter Financial Results

NORWALK, CT—Jan. 26, 2011—Xerox Corp. announced fourth-quarter 2010 results that include adjusted earnings per share of 29 cents and $1.3 billion in operating cash flow. Fourth-quarter revenue of nearly $6 billion was up 42 percent, including a one point negative impact from currency.

The company’s full-year 2010 net income was $606 million. Total revenue was $21.6 billion, up from $15.2 billion in 2009.

“We started 2010 with the acquisition of Affiliated Computer Services, which transformed our company into the world’s leading enterprise for business process and document management. And, we closed the year with results that reflect the benefits of our expanded services and competitive technology as well as the strength of our business model,” said Ursula Burns, Xerox chairman and CEO. “In 2010, we grew adjusted earnings, increased revenue and generated $2.7 billion in operating cash—delivering across the board on our commitments and creating greater value for shareholders.”

On a pro-forma basis, with ACS in the company’s results, total revenue grew 2 percent or 3 percent in constant currency for the fourth quarter. Revenue from technology, representing the sale of document systems, supplies, technical service and financing of products, was flat or up one percent in constant currency.

Total install activity for Xerox equipment was up 6 percent, reflecting solid demand across all product segments. Revenue from services was up 5 percent on a pro-forma basis or 6 percent in constant currency, and represents the company’s business process, IT and document outsourcing offerings.

“Continued growth in our services business was driven by an 11 percent increase in revenue from our BPO offerings and 5 percent revenue growth from IT outsourcing. As important, signings for services were up 13 percent in the quarter,” added Burns. “In our technology business, increased distribution and the launch of 21 products last year led to an overall 6 percent equipment sales growth in the quarter. Combined, strength in services and the sale of more Xerox technology fuels our annuity and positions us well for continued growth this year and for the long term.”

Fourth-quarter gross margin was 33.6 percent, and selling, administrative and general expenses were 20 percent of revenue. On a pro-forma basis, operating margin of 10.4 percent was up one point from fourth-quarter 2009. For the full year, gross margin was 34.4 percent and SAG expenses were 21.2 percent of revenue. Pro-forma operating margin was 9.6 percent, up one point from full-year 2009.

The $1.3 billion in operating cash flow in the fourth quarter contributed to $2.7 billion in cash flow for the full year. From the time of the ACS acquisition in February 2010, Xerox reduced total debt by $1.9 billion to $8.6 billion. Xerox ended the year with a cash balance of $1.2 billion.

About Xerox
Xerox Corp. is a $22 billion leading global enterprise for business process and document management. Through its broad portfolio of technology and services, Xerox provides the essential back-office support that clears the way for clients to focus on what they do best: their real business. Headquartered in Norwalk, Conn., Xerox provides leading-edge document technology, services, software and genuine Xerox supplies for graphic communication and office printing environments of any size. Through ACS, A Xerox Company, which Xerox acquired in February 2010, Xerox also offers extensive business process outsourcing and IT outsourcing services, including data processing, HR benefits management, finance support, and customer relationship management services for commercial and government organizations worldwide. The 136,000 people of Xerox serve clients in more than 160 countries. For more information, visit www.xerox.com. For investor information, visit www.xerox.com/investor.

Source: Financial release.