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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
December 10, 1999
XEROX CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-4471 16-0468020
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
800 Long Ridge Road
P. O. Box 1600
Stamford, Connecticut 06904-1600
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:
(203) 968-3000
Item 5. Other Events
Registrant announced on December 10, 1999 that it estimates that fourth
quarter earnings per share could be approximately 40 percent lower than the
First Call consensus estimate.
This is a preliminary estimate because December remains the most important
month of the fourth quarter. However, based on results for October and
November, and an outlook of December, there is sufficient information to
confirm the factors that affected the third quarter have intensified:
1. High-end printing and publishing equipment sales are significantly
constrained because of a focus on Y2K mitigation efforts and customer network
lockdowns, which appear to be intensifying in December.
2. The effects of the U.S. customer administration reorganization have
intensified, resulting in higher than anticipated expenses, including bad
debts. This also continued to impact sales productivity.
3. Profits from the Brazilian operation will be substantially below fourth
quarter expectations as a result of the continuing economic weakness following
the major currency devaluation earlier this year.
4. The strengthening of the U.S. dollar against European currencies thus far
this quarter has unfavorably impacted translation of European revenues and
profits.
Registrant expects the first three of these factors will improve during 2000.
As Registrant approaches the January 1 realignment of its sales organization
to an industry solutions focus, the fourth quarter is also affected by
continued lower sales productivity in the U.S. and Europe. The unfavorable
mix in a number of product segments and competitive pricing pressures, which
affected the third quarter, also continued.
"While I am disappointed with these adverse developments, the primary reasons
are clearly unrelated to long-term fundamentals," said Rick Thoman,
Registrant's president and CEO. "In 2000, the Y2K issue disappears, the U.S.
customer administration issues will progressively improve, we expect some
recovery in Brazil and our sales force reorganization will have been
implemented. To ensure that our cost base is aligned with the increasingly
competitive environment, we are in the midst of a comprehensive review of our
costs and key business processes to identify opportunities for substantial
additional savings. All of these support my confidence that our earnings will
show meaningful growth in the second half of next year."
"Our strategy embraces both black-and-white and color. We will continue to
lead the digital transition in the office. And we are also focusing on three
double-digit growth segments: high-end publishing solutions, outsourcing, and
channels, which addresses the small and networked office. By 2001, we expect
to double -- to around 50 percent -- the proportion of our revenue from these
three fast-growing businesses," Thoman said.
Xerox plans to announce fourth quarter results on January 25, 2000.
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Forward-Looking Statements
From time to time Xerox Corporation (the Registrant or the Company) and its
representatives may provide information, whether orally or in writing,
including certain statements in this Form 8-K which are deemed to be "forward-
looking" within the meaning of the Private Securities Litigation Reform Act of
1995 ("Litigation Reform Act"). These forward-looking statements and other
information relating to the Company are based on the beliefs of management as
well as assumptions made by and information currently available to management.
The words "anticipate," "believe," "estimate," "expect," "intend," "will," and
similar expressions, as they relate to the Company or the Company's
management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Registrant with respect to future
events and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary materially
from those described herein as anticipated, believed, estimated or expected.
The Registrant does not intend to update these forward-looking statements.
In accordance with the provisions of the Litigation Reform Act we are making
investors aware that such "forward-looking" statements, because they relate to
future events, are by their very nature subject to many important factors
which could cause actual results to differ materially from those contained in
the "forward-looking" statements. Such factors include but are not limited to
the following:
Competition - the Registrant operates in an environment of significant
competition, driven by rapid technological advances and the demands of
customers to become more efficient. There are a number of companies worldwide
with significant financial resources which compete with the Registrant to
provide document processing products and services in each of the markets
served by the Registrant, some of whom operate on a global basis. The
Registrant's success in its future performance is largely dependent upon its
ability to compete successfully in its currently-served markets and to expand
into additional market segments.
Transition to Digital - presently black and white light-lens copiers represent
approximately 30 percent of the Registrant's revenues. This segment of the
general office is mature with anticipated declining industry revenues as the
market transitions to digital technology. Some of the Registrant's new
digital products replace or compete with the Registrant's current light-lens
equipment. Changes in the mix of products from light-lens to digital, and the
pace of that change as well as competitive developments could cause actual
results to vary from those expected.
Pricing - the Registrant's ability to succeed is dependent upon its ability to
obtain adequate pricing for its products and services which provide a
reasonable return to shareholders. Depending on competitive market factors,
future prices the Registrant can obtain for its products and services may vary
from historical levels. In addition, pricing actions to offset currency
devaluations may not prove sufficient to offset further devaluations or may
not hold in the face of customer resistance and/or competition.
Financing Business - a significant portion of the Registrant's profits arise
from the financing of its customers' purchase of the Registrant's equipment.
On average, 75 to 80 percent of equipment sales are financed through the
Registrant. The Registrant's ability to provide such financing at competitive
rates and realize profitable spreads is highly dependent upon its own costs of
borrowing which, in turn, depend upon its credit ratings. Significant changes
in such ratings could reduce the profitability of such financing business
and/or make the Registrant's financing less attractive to customers thus
reducing the volume of financing business done. The Registrant's present
credit ratings permit ready access to the credit markets. There is no
assurance that these credit ratings can be maintained and/or ready access to
the credit markets can be assured.
Productivity - the Registrant's ability to sustain and improve its profit
margins is largely dependent on its ability to maintain an efficient, cost-
effective operation. Productivity improvements through business process
reengineering, design efficiency and supplier cost improvements are required
to offset labor cost inflation and potential materials cost changes and
competitive price pressures.
International Operations - the Registrant derives approximately half its
revenue from operations outside of the United States. In addition, the
Registrant manufactures many of its products and/or their components outside
the United States. The Registrant's future revenue, cost and profit results
could be adversely affected by a number of factors, including changes in
foreign currency exchange rates, changes in economic conditions from country
to country, changes in a country's political conditions, trade protection
measures, licensing requirements and local tax issues.
New Products/Research and Development - the process of developing new high
technology products and solutions is inherently complex and uncertain. It
requires accurate anticipation of customers' changing needs and emerging
technological trends. The Registrant must then make long-term investments and
commit significant resources before knowing whether these investments will
eventually result in products that achieve customer acceptance and generate
the revenues required to provide anticipated returns from these investments.
Revenue Growth - the Registrant's ability to attain a consistent trend of
revenue growth over the intermediate to longer term is largely dependent upon
expansion of its equipment sales worldwide. The ability to achieve equipment
sales growth is subject to the successful implementation of our initiatives to
provide industry-oriented global solutions for major customers and expansion
of our distribution channels in the face of global competition and pricing
pressures. Our inability to attain a consistent trend of revenue growth could
materially affect the trend of our actual results.
Restructuring - the Registrant's ability to ultimately reduce pre-tax annual
expenditures by approximately $1 billion is dependent upon its ability to
successfully implement the 1998 restructuring program including the
elimination of 9,000 jobs, net, worldwide, the closing and consolidation of
facilities, and the successful implementation of business process and systems
changes. In addition, the timing and effectiveness in overcoming issues in
centralizing its customer administration centers can impact the timing of
improvements in revenue, profit and cash flow.
Sales Force Realignment - the Registrant's ability to increase future revenue
and profits is in part dependent upon its ability to successfully implement
the substantial changes in the alignment of its sales force to sell products,
services and solutions by industry sectors.
Year 2000 - the Registrant's ability to complete its Year 2000 plan is
dependent upon the availability of resources, the Registrant's ability to
discover and correct the potential Year 2000 sensitive problems which could
have a serious impact on the Registrant's information management systems,
facilities and products, and the ability of the Registrant's suppliers and
customers to bring their systems into Year 2000 compliance.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly authorized this report to be signed on its behalf by the
undersigned duly authorized.
XEROX CORPORATION
/s/ MARTIN S. WAGNER
--------------------------------
By: MARTIN S. WAGNER
Assistant Secretary
Dated: December 13, 1999