24 Jan 2020

Xerox Q3 Earnings Drop 52%

Xerox logo

Xerox Corporation announced today third-quarter 2009 results that include earnings per share of 14 cents and $610 million in operating cash flow.

"Our third-quarter performance reflects our continued disciplined approach to managing cash and reducing costs," said Ursula M. Burns, Xerox chief executive officer. "As a result, we exceeded our expectations for earnings and operating cash flow, and are benefiting from operational improvements that are mitigating the economic challenges."

The company reported third-quarter total revenue of $3.7 billion, down 16 percent from third-quarter 2008 including a 2 point negative impact from currency. Post-sale and financing revenue was down 11 percent, or 9 percent in constant currency. Equipment sale revenue declined 29 percent, or 28 percent in constant currency.

"Just as we are closely managing costs, our customers are doing the same and we have not seen a meaningful shift towards increased spending on technology," she added. "For many of our business clients – small to large – there remains a hesitancy to invest until more economic factors show signs of steady improvement. We expect this trend will continue to put pressure on revenue for the balance of the year.

"At the same time, we're winning new business from clients who want to reduce their cost base through our industry-leading managed print services," said Burns. "Scaling our services business has long been a strategic focus. The growth opportunity is significant, customers are demanding more service-related value, and the multi-year contracts provide profitable recurring revenue. These factors give us confidence in the strategic and financial rationale for acquiring Affiliated Computer Services. With this acquisition and the benefits of our existing annuity-based business, we'll deliver significant revenue growth, cash and earnings expansion."

Third-quarter operating cash flow was $610 million. Through the third quarter, the company has generated $1.2 billion in operating cash flow, and, as a result, has increased its expectation for the full year to $1.7 billion. Xerox ended the third quarter with a cash balance of $1.2 billion. Total debt was down $938 million through the first three quarters, and the company is on track to reduce total debt by more than $1 billion this year.

Gross margin was 39.8 percent in the third quarter, an increase of over half a point from the prior year. Third-quarter selling, administrative and general expenses were down year over year by $131 million and SAG as a percent of revenue was 27.4 percent.

Xerox expects fourth-quarter 2009 earnings per share in the range of 20 cents to 22 cents, excluding costs related to the acquisition of ACS. The company has increased its full-year earnings expectations to 55 cents to 57 cents per share, which excludes fourth-quarter ACS acquisition related costs. Prior guidance for full-year 2009 was 50 cents to 55 cents per share.

This release discusses revenue growth using a measure noted as "Constant Currency" that excludes the effects of currency translation. Refer to the "Non-GAAP Financial Measures" section of this release for a discussion of these non-GAAP measures. In addition, fourth-quarter and full-year 2009 EPS has been provided without including fourth-quarter ACS acquisition related costs, which cannot be specifically quantified at this time.

This release contains "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. The words "anticipate," "believe," "estimate," "expect," "intend," "will," "should" and similar expressions, as they relate to us, are intended to identify forward-looking statements. These statements reflect management's current beliefs, assumptions and expectations and are subject to a number of factors that may cause actual results to differ materially. These factors include but are not limited to: the unprecedented volatility in the global economy; the risk that unexpected costs will be incurred; the outcome of litigation and regulatory proceedings to which we may be a party; actions of competitors; changes and developments affecting our industry; quarterly or cyclical variations in financial results; development of new products and services; interest rates and cost of borrowing; our ability to protect our intellectual property rights; our ability to maintain and improve cost efficiency of operations, including savings from restructuring actions; changes in foreign currency exchange rates; changes in economic conditions, political conditions, trade protection measures, licensing requirements and tax matters in the foreign countries in which we do business; reliance on third parties for manufacturing of products and provision of services; the risk that the future business operations of Affiliated Computer Services, Inc. ("ACS") will not be successful; the risk that customer retention and revenue expansion goals for the ACS transaction will not be met; the risk that disruptions from the ACS transaction will harm relationships with customers, employees and suppliers; and other factors that are set forth in the "Risk Factors" section, the "Legal Proceedings" section, the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section and other sections of our Quarterly Report on Form 10-Q for the quarters ended March 31, 2009 and June 30, 2009 and our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statements as a result of new information or future events or developments, except as required by law.

Xerox and ACS urge investors and security holders to read the joint proxy statement/prospectus regarding the proposed transaction when it becomes available because it will contain important information. You may obtain a free copy of the joint proxy statement/prospectus, as well as other filings containing information about Xerox and ACS, without charge, at the Securities and Exchange Commission's (SEC) Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, when available, without charge, from Xerox's website, http://www.xerox.com, under the heading "Investor Relations" and then under the heading "SEC Filings". You may also obtain these documents, without charge, from ACS's website, http://www.acs-inc.com, under the tab "Investor Relations" and then under the heading "SEC Filings". Information regarding participants or persons who may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction is contained in Xerox's proxy statement for its most recent annual meeting and ACS's proxy statement for its most recent annual meeting, both as filed with the SEC.

Following Print 09 Fujifilm sees upturn in sales

Fujifilm logo

FUJIFILM Graphic Systems U.S.A., Inc., is reporting an increase in sales and sales inquiries in the weeks following the PRINT 09 Show. The company attributes the upturn to substantial investments in R&D, strategic partnerships and acquisitions.

With industry-leading businesses that include Fujifilm Sericol, Fujifilm Dimatix, and Fuji Xerox as partners, Fujifilm Graphic Systems is able to leverage advances in printing and graphic arts technology that provide customers with opportunities to profit in the evolving printing marketplace.

"At PRINT 09, our customers saw the fruits of our investments, including the North American debut of the new Fujifilm Inkjet Digital Press - a culmination of the collaboration among Fujifilm group companies," said Masahiro Ota, president and chief executive officer of FUJIFILM Graphics U.S.A. "Together with the Inca Onset S20 and Fujifilm Sericol's leading ink technologies, as centerpieces in Fujifilm's exhibit booth, we have never seen a more positive response from customers and prospective buyers."

According to Mr. Ota, in selecting Fujifilm, printers are choosing a partner that has the financial health and strength not only to guide their businesses, but to also lead the industry.

A leading securities firm, Mizuho Securities, recently upgraded its recommendation for Fujifilm's stock. The analyst observed that Fujifilm was, "now more likely to achieve record-high profits in fiscal 2011/12." (Forbes/Reuters) This assessment of Fujifilm's strength speaks to the success of the company's diversification into new businesses, and to its ability to reinvigorate traditional businesses by identifying high potential opportunities within their markets.

In Fujifilm's most recent report to shareholders, Graphic Arts was called out as one of the company's five priority business fields for growth, listing the following objectives for its print businesses:

• Fujifilm's continuous R&D investment in the printing and graphic arts business.
• Employ Fujifilm and Fuji Xerox's inkjet and xerography technologies and effectively coordinating such management resources as marketing channels and brand values in the digital printing market.
• Aim for the top global market share for CTP plates.

In the face of the current economic challenges, Fujifilm remains committed to leveraging its heritage in the printing and graphic arts field to introduce new solutions for profitable revenue generation.

"While it may seem counterintuitive or even a bit intimidating, economic climates such as the current one do offer business owners an opportunity to grow," said Mr. Ota. "This kind of growth requires both a focus on what's most important: cash flow, cost control, expansion of services and capabilities and effective marketing, as well as having a strong and reliable partner like Fujifilm.

"Our theme at the Print 09 show was 'In Control.' That's what we do, especially in times of economic uncertainty, help our customers remain in control and stay focused on what's most important to their businesses."

The full list of DPI 'Product of the Year' Winners

SGIA DPI Product of the Year Award

You can already find a number of news stories on LFR that have been submitted by proud recipients of a prestigious DPIA Product of the Year award, that were issued at the recent SGIA Expo in New Orleans.

To ensure the less PR-savvy of the winners get their moment in the spotlight, LFR are delighted to bring you the winners list in its entirity...

  • Digital Inks: Roland DGA Corporation - Metallic Silver Ink
  • RIP Software and Proofing Software: Caldera Graphics - GrandRIP+ with Adobe PDF Print Engine
  • Media-Paper: Ultraflex Systems Inc. - Limelight 4.8
  • Media-Vinyl: Dreamscape - DreamScape Bling!
  • Media-Films: Xcel Products Inc. - Visual Magnetics Write-On Chalkboard
  • Media-Textile: Vapor Apparel/Source Substrates - Micro Performance Repreve
  • Media-Rigid: Rochling Engineering Plastics Ltd - PE2PRINT-Digital
  • Business or Other Workflow Software: Nazdar SourceOne - CATZper Color Tolerancing Software
  • Finishing-Display Exhibit Hardware: Xcel Products Inc. - VMGS Featuring Write-On Chalkboard
  • Finishing-Laminates, Adhesives, Films, Coatings: FLEXcon - FLEXmark floor art 6600
  • Finishing-Equipment: Maverick Innovations, Inc. dba Extreme Graphics - The Wraptor
  • Poster Size: Roland DGA Corporation - VersaCAMM VP-300i
  • Rigid Substrate UV <$200K MSRP: Océ Display Graphics Systems - Arizona 350 GT
  • Rigid Substrate UV >$200 MSRP: Océ Display Graphics Systems - Arizona 350 XT
  • Grand Format Roll-to-Roll-Solvent & Latex inks: Roland DGA Corporation - Advanced JET AJ-1000i
  • Grand Format Roll-to-Roll-UV cure ink: Durst Image Technology US LLC - Rho 500R
  • Direct to Garment Inkjet Printers: Kornit Digital - Kornit 932NDS

All of the entries were showcased and evaluated by a team of digital imaging professionals during the 2009 SGIA Expo (New Orleans, October 7-9) in the Golden Image Gallery.

Now we could be wrong, but we think a number of these award-winning products are not even sold in the UK, or if they are, someone is keeping it quieter than they ought to. Perhaps there is an opportunity there for someone?

Spandex announces Open House designed to help Digital Print and Signmaking Businesses

Spandex Open Days

Spandex, the pioneering one-stop supplier of complete and innovative solutions to the digital printing and signmaking industries, has announced that its next highly informative open house will take place in Bristol on November 26th and 27th 2009. The event will focus on helping existing and potential customers succeed in today’s economy and will follow the company’s successful theme of ‘Learn, Discover and Benefit’.

The two-day open house will comprise key seminars, including, ‘Succeeding in today’s economy’ by Vaughan Allcock, owner of Event Signs, a 25-year-old signmaking business. Author and marketing consultant, Jackie Jarvis, is also returning to the event to deliver her new presentation, ‘How to sell the natural way to attract and keep more customers’.

“Our November Open House has been specifically designed to help customers improve sales and profitability, widen their service capability and obtain information about which equipment will provide the best return on investment”, says Phil McMullin, Spandex’s UK Country Manager. “Given the popularity of our previous open houses, we would strongly advise those interested to book early to secure a place at the event.”
Another highlight of the event will see Spandex hold interactive workshops designed to assist customers with bringing expertise in-house, thereby reducing costs and widening their range of services. One such workshop will focus on textile marking and enable customers to try heat presses and Spandex’s broad and exciting range of textile marking materials. Other workshops will cover vehicle wrapping; lamination techniques; fixings and fastenings; and new techniques in modular sign systems.

The open-house will also see Spandex demonstrate the revenue-enhancing capabilities and unique benefits of its major large format digital printing systems via live and invaluable product demonstrations. Among the latest machines on display will be the new Epson® Stylus Pro GS6000, a 64”, high-speed, eight-colour inkjet printer; and the new Mutoh Kona, a cost effective and flexible plotter. The event will see Spandex demonstrate both systems for the first time. The Gerber Solara ion, a flatbed/roll-to-roll, wide-format, UV inkjet printer featuring advanced GerberCAT™ cationic inks and Cold Fire Cure™ technology will also be on display.

Also on show will be a wide selection of new products from media brands including Avery®, 3M™ and Mactac®, as well as the company’s own ImagePerfect™ range. The event will allow visitors to access materials specialists who will be on-hand to provide information on new substrates, as well as offer useful printing tips and techniques for various large format printing applications.

A number of special promotions, exclusive to the Open House, will be running on the day. Visitors can pre-register for the event by following www.spandex.co.uk/openhouse.

Full details of Spandex’s October Open House are:

Bristol:

  • 26 November 2009 – 10:00h to 20:30h
  • 27 November 2009 – 10:00h to 15:00h
Address: Spandex UK, 1600 Park Avenue, Aztec West, Almondsbury, Bristol BS32 4UA

More information on the event is available by visiting: www.spandex.co.uk/openhouse

Technology Partners form INX Digital

INX Digital International Co logo 

INX Group Ltd. announced the formation of INX Digital International Co. The formation of this company is the next step in Sakata INX’s digital strategy to combine its digital resources into one cohesive group. Former joint venture partners Triangle Digital INX, Megaink AS, and Anteprima SRL have agreed to transfer their interest from their former companies for ownership in INX Digital International with Sakata INX being the majority shareholder.

INX Digital will be led by key personnel from Triangle, Megaink, Anteprima and INX forming a global management team. Together, the group can expand its product and service capabilities such as traditional and environmentally friendly ink, along with engineering expertise and distribution for the wide and super-wide format digital inkjet marketplace. Current product line offerings will continue to support regional channel strategies with customers receiving technical assistance and support from one of three global divisions: the Americas, Asia Pacific, and Europe, Middle East and Africa (EMEA).

“The world continues to become smaller every day and in today’s environment, it makes sense to maximize each and every opportunity to help our customers. It’s good for their business as well as ours,” said Rick Clendenning, INX International president and CEO. “By combining these companies’ cumulative resources, INX Digital is well positioned to deliver to a worldwide audience in a responsive manner not seen before. With the vast capabilities and global support of Sakata INX in relation to its raw materials, logistics, manufacturing, and R&D resources, we are excited and optimistic INX Digital will meet and exceed the demands of the marketplace.”

INX Digital is a world leader in OEM equipment-matched solvent based inks. In recognizing the strong marketplace positions it has developed, customers can expect valuable technical assistance and support to continue from the three global divisions. The Americas will be supported through INX Digital’s offices and manufacturing locations in California, the Asia Pacific division by its established presence in Guangzhou, China, and the EMEA division by the existing facilities in Milan, Italy and Prague, Czech Republic.

Ink - The Raw Material Report

ink pigment

For ink manufacturers, continued volatility in crude oil prices and supply concerns remain serious challenges.

In terms of raw material pricing, the past few years have been brutal for the printing ink industry. Led by the dramatic surge of crude oil prices, a critical ingredient for key feedstocks as well as waxes, resins and other ingredients, raw material costs for inks skyrocketed. Pent-up prices also played a role, as companies long stymied by pressure from ink manufacturers to keep costs down finally pushed through increases.

The elimination of the VAT as well as some shutdowns in the Chinese pigment industry compouned the ink industry’s supply problems. In adddition, some key raw materials – notably naphthenic oil and acrylic acid – are in demand from much larger industries, such as tires and diapers, respectively.

The global recession has led to a decrease in demand for products, leaving inventories of higher-priced materials in its wake. Consolidation is also playing a part in pricing, as some key manufacturers have left the ink field.

Today, crude oil prices have declined sharply, although no one really knows what to expect next. This leaves ink companies with the challenge of formulating their own prices and planning for an uncertain future.


Raw Material Pricing

When discussing overall raw material costs, one has to start at crude oil prices. In July 2008, the price of crude oil topped out at $145 per barrel. Today, prices have fallen below $75 per barrel.

The questions are how has the decline in the cost of crude oil impacted raw material pricing, and whether ink manufacturers seeing any retreat in prices from their suppliers.

“Although crude oil prices have lowered significantly since last year’s peak in July, the pace of reductions in our raw materials has been significantly impacted by the high levels of older and more costly feedstocks and raw materials in our suppliers’ systems,” said Ed Pruitt, chief procurement officer, Sun Chemical. “The rapid decline in demand starting in the fourth quarter of last year eclipsed many of our pigments, intermediates and resin suppliers’ abilities to respond. True year over year improvement in average prices will not be achieved until all of these inventory effects completely work their way through the supply chain.”

Mr. Pruitt noted that Sun Chemical continues to work on controlling its own costs closely with its supply chain partners, to improve internal operations and to develop new value-oriented products that can help customers grow their business.

“We will continue to invest in those areas that provide our customers with innovative products and services, allowing them to be more competitive and present the best value propositions in the market,” Mr. Pruitt noted.

“Pricing for most of our raw materials peaked around September/October of 2008, about two to three months after the price of crude oil peaked,” said Ben Price, director of purchasing at Wikoff Color. “There was an even longer lag between the subsequent decline in crude oil prices and our raw material price relief. The lag was reportedly a result of demand coming to a screeching halt, leaving many of our suppliers with excessive amounts of higher cost inventory on their floors.” 

Mr. Price added that Wikoff Color has recently experienced price relief across a wide range of raw materials, and expects that relief to continue in many areas.

“During the first three quarters of 2008, we experienced dramatic price increases in raw materials,” said George Sickinger, president and CEO of Color Resolutions International (CRI). “However, in September, with the price of oil dropping, prices stabilized. In November we set up meetings with all current and new vendors to meet with us to discuss how to reduce our cost of materials and offer savings opportunities.”

“Until the first quarter of 2009, raw material prices had been declining,” said Yu Adachi, corporate communications for Toyo Ink Mfg. Co., Ltd. “Recently, however, prices have started to rise again gradually. As part of Toyo’s SCM program, we’ve consistently evaluated suppliers not only from a pricing standpoint, but also by the quality of materials offered.”


Volatility in The Marketplace

As a result of unstable oil prices, raw material costs have been volatile. For example, Mr. Adachi pointed to various solvents and olefin compounds as being most volatile in terms of pricing and supply.

“Despite a recent respite in the pace of volatility, there are a number of areas of concern,” Mr. Pruitt said. “First, oil industry experts would say that the crude market will continue to be highly volatile, with an expectation that prices will eventually return to the very high levels of recent years due to the inability of new production to offset the gradual depletion of existing supply and the growth of demand in developing nations. Secondly, the petrochemicals market has risen sharply recently due to actions taken by producers to shut down high cost production. Third, there are individual products today in a variety of categories including pigments, base chemicals and resins that are still at very high levels and are not expected to decline to 2008 average price levels.

“As a general rule, raw materials suppliers are actively shuttering plants, rationalizing product lines and taking the steps that companies must take in extraordinarily difficult times, but steps that could lead to interruptions or tightening supply despite the overall weakness of the global markets,” Mr. Pruitt added.

“Almost all raw materials for printing inks have been volatile over the last 12 months, but in general, pricing of raw materials that are most closely linked to crude oil have been the most volatile,” Mr. Price noted. “Examples include many of our solvents, energy cure raw materials and carbon black. “On the other hand, we have also seen significant price swings in some raw material areas that are not directly linked to crude oil,” Mr. Price added. “In most of these situations, the pricing volatility we have experienced is more the result of changes in supply and demand than changes in feedstock costs.”

Mr. Sickinger noted that for the most part, pricing has stabilized.

“We have experienced little volatility in pricing and supply this year,” he said. “We are seeing price increases in plastic, polypropylene, butadiene and some acrylic resin products.”


Supply Concerns

Supply has also been an issue, as some firms are closing plants or shutting down altogether in order to better weather the economic storm.

“The biggest concern we have during this economic downturn is that some suppliers will not survive and others may choose to exit unprofitable businesses that have an impact on ink makers,” Mr. Price said. “In either scenario, the result is fewer choices for the buyer and upward pressure on pricing. Another concern is that if demand picks up sooner than expected, some suppliers will not be prepared to meet it. In an effort to cut costs, many of our suppliers have had to lay off employees and close production facilities. If we experience a sudden spike in demand in markets these suppliers serve, raw material shortages are likely.”

“To date, we have not had any major issues with supply,” said John Edelbrock, vice president of operations for CRI. “Improved forecasting has become a key component to supply. We are seeing suppliers reducing inventories and some asking for more lead time.”

“Our supply concerns are largely focused on three areas of risk,” Mr. Pruitt said. “The first area is the financial health of some of our supply base, whose operations have seen dramatic reductions in both demand and profitability. The second area is actions by upstream producers of feedstocks to temporarily or permanently close operations may have the unintended consequence of creating a shortage in downstream intermediates, resins or functional chemicals. Finally, reductions in inventories and hours of operations by our suppliers in response to the economic crisis may leave the supply chain too taut to respond to a favorable upturn in demand.”

According to Mr. Pruitt, Sun Chemical’s response to these risks is to tap its strong sources of market intelligence and to work closely with supplier partners to “fully understand the risks in our supply chain and to develop the appropriate contingencies and actions to assure supply continuity.”


Consolidation Among Suppliers

Consolidation has changed the face of the business world, and the ink industry suply chain is no exception. In the past 12 months, major acquisitions have occurred, most notably Dow Chemical acquiring Rohm & Haas and BASF taking over Ciba. In the case of Rohm & Haas, the company divested its graphic arts resin business to Hydrite Chemical.

“Supplier consolidation has not had a significant effect on our raw material supply,” Mr. Price said. “What has been more significant is suppliers electing to exit certain markets. This is particularly noticeable in the resin area where Rohm & Haas, Dow and Hexion have all discontinued the production of some product lines.”

“One major resin manufacturer has left the market and sold the rights to manufacture the majority of their resin products,” Mr. Edelbrock said. “We have worked through those changes. Another resin manufacturer is adding capacity, which will offer more supply stability.”

“Due to consolidation and production optimization among suppliers, it has become increasingly more difficult for manufacturers to buy materials in small lots or customized,” Mr. Adachi reported. “At Toyo, we’ve had to standardize or decrease the number of raw materials used in our products, leveraging higher volumes to reduce prices. We’ve also worked to find new supply sources.”

Expectations for The Coming Year

The important question, then, is what is in store of the next year. The answer is that no one really knows, as oil prices and further consolidation may inpact markets further.

“There are many indications that the economy is starting to improve, but most agree that this will be a slow process,” Mr. Price said. “There may be suppliers who attempt to increase prices, but unless demand in our industry picks up, prices will remain relatively stable or decrease further in most raw material areas. Of course, this could all change if we see another drastic increase in crude oil pricing. It would not be surprising to see a reduction in suppliers resulting from consolidation, exiting markets or going out of business.”

“We expect raw material prices to continue to rise over the next year,” Mr. Adachi said. “Toyo will undertake further initiatives to strengthen our supply chain.”

“We have seen material prices decrease an average of 6 percent the first two quarters of 2009,” Mr. Sickinger said. “Economic activity in the manufacturing sector failed to grow in June for the 17th consecutive month. Aggressive inventory reduction continues and indications are that we are near the end of de-stocking. I believe real demand has reappeared according to an increase in July customer orders. I would expect raw material prices to stay relatively flat with some price increases due to suspected oil increases later in 2009.”

“Sun Chemical expects to continue seeing a gradual reversal of many of the cost impacts from 2008,” Mr. Pruitt said. “First, we’ll see cost reductions in the most directly oil sensitive raw materials followed by the gradual unwinding of prices for raw materials further down the value chain. High inventory levels and long supply chains also contribute to the pace of change.”