Xerox Reports Fourth-Quarter 2007 Earnings of 41 Cents Per Share; Reiterates Full-Year 2008 Earnings Guidance

    -   Total revenue up 11 percent, post-sale revenue up 12 percent as
    -   Total color revenue up 14 percent
    -   Full-year operating cash flow of $1.9 billion
    -   Board authorizes additional $1 billion in share repurchase

    NORWALK, CT, Jan. 24 /CNW/ - Xerox Corporation (NYSE:   XRX) announced
today fourth-quarter 2007 earnings per share of 41 cents. This compares to 22
cents from fourth-quarter 2006, which included a 16 cent per share
restructuring charge.
    Excluding the charge, earnings per share for fourth-quarter 2007 is up 8
percent from the adjusted prior year EPS.
    Total revenue of $4.9 billion grew 11 percent in the quarter with
post-sale and financing revenue up 12 percent; this annuity stream represents
about 70 percent of total revenue. Both total revenue and post-sale revenue
included a currency benefit of 4 percentage points as well as the benefit from
Xerox's acquisition of Global Imaging Systems.
    "Our growing annuity revenue and strong cash generation, along with our
disciplined approach to controlling costs, result in consistent delivery of
solid performance year after year," said Anne M. Mulcahy, Xerox chairman and
chief executive officer. "In 2007, we expanded earnings, grew revenue,
generated $1.9 billion in operating cash flow, repurchased $631 million in
Xerox shares and declared a dividend. As important, we fortified our
leadership in the marketplace through increased distribution and innovative
technology and document management services.
    "Xerox operates in a global business environment, serving a wide range of
markets with more than 50 percent of our revenue generated from customers
outside the U.S.," she added. "This worldwide reach and our effective business
model -- combined with our competitive offerings and strong recurring revenues
-- position us well to continue building value for shareholders. As a result,
we remain committed to delivering on our 2008 full-year EPS guidance of $1.31
to $1.35, and we are increasing our guidance for full-year operating cash
    The acquisition of Global Imaging Systems, which provides a broader
distribution to small and mid-size businesses in the U.S., led to a 10 percent
increase in equipment sales, including a 5 point benefit from currency. In
2007, Xerox introduced 39 products, more than twice the number of products it
launched in 2006. More than two-thirds of Xerox's equipment sale revenue comes
from products launched in the past two years.
    Revenue from color grew 14 percent in the fourth quarter and now
represents 40 percent of Xerox's total revenue, up 3 points from the fourth
quarter of 2006. Xerox color devices print the highest volume of pages in the
industry - producing more than 40 billion color pages in 2007, an increase of
more than 30 percent from 2006.
    In the fourth quarter, the number of color pages grew 34 percent, and now
represent 14 percent of total pages, up 4 points from the prior year. Color
performance excludes Global Imaging Systems results.
    Xerox services help businesses simplify work processes, manage office
technology and in-house print shops, digitize paper files, create digital
archives and much more. During 2007, Xerox Global Services generated
$3.4 billion in annuity revenue, an 8 percent increase over 2006.
    "As businesses shift to more color in the office and begin to see the
cost benefits of simplifying their work processes, they're turning to Xerox
for our innovation and expertise. Our focus on color and document services is
fueling our annuity stream and creating long-term value in our company," said
    Xerox's production business provides commercial printers and
document-intensive industries with high-speed digital printing and services
that enable on-demand, personalized printing. Total production revenue
increased 5 percent in the fourth quarter, including a 6 point currency
benefit. Production color installs grew 3 percent. Installs of production
black-and-white systems declined 10 percent.
    Demand for the Xerox Nuvera(R) EA and Xerox Nuvera 288 digital presses as
well as continuous feed systems only partially offset declines from other
high-volume and light-production systems.
    Through expanded channels of distribution and competitive offerings for
businesses of any size, Xerox continues to drive the demand for color in the
office with installs of color multifunction systems up 67 percent. Total
office revenue was up 14 percent in the fourth quarter, including a 5 point
benefit from currency. Installs of the company's black-and-white multifunction
devices increased 6 percent.
    Gross margins were 40.5 percent, down about a half a point from the
fourth quarter of 2006. Selling, administrative and general expenses were 24.3
percent of revenue, up 1 point from fourth-quarter 2006. The strength of
Xerox's annuity-based business model led to a significant increase in
operating cash flow, generating $1 billion in the fourth quarter and
$1.9 billion for the full year.
    Since launching its stock buyback program in October 2005, Xerox has
repurchased 137 million shares or 13 percent of outstanding shares. Earlier
this week, Xerox's Board of Directors authorized an additional $1 billion,
adding to the remaining $370 million available for share repurchase.

    Xerox expects first-quarter 2008 earnings in the range of 25 to 28 cents
per share.

    Full-Year 2007 Results

    -   Net income of $1.1 billion

    -   As reported, 2007 EPS of $1.19 compares to 2006 EPS of $1.22. On an
        adjusted basis, 2007 EPS of $1.19 compares to 2006 EPS of $1.05, an
        increase of 13 percent.

    -   Total revenue of $17.2 billion, an increase of $1.3 billion or
        8 percent from full-year 2006, includes revenue generated from
        Global Imaging Systems, which Xerox acquired in May of 2007.

    -   Operating cash flow of $1.9 billion

    -   Condensed consolidated statements of income, balance sheet, cash
        flows, and full financial review can be found at:

    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
risk that the future business operations of Global Imaging Systems (GIS) will
not be successful; the risk that customer retention and revenue expansion
goals for the GIS transaction will not be met and that disruptions from the
GIS transaction will harm relationships with customers, employees, agents,
distributors and suppliers; 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 maintain and improve cost efficiency of operations; 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; and other factors
that are set forth in the "Risk Factors" section, the "Legal Proceedings"
section, the "Management's Discussion and Analysis of Results of Operations
and Financial Condition" section and other sections of our Quarterly Reports
on Form 10-Q for the quarters ended March 31, June 30, and September 30, 2007,
as well as in our 2006 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.

    For more information on Xerox, visit or

    For open commentary and industry perspectives, visit or

    Xerox(R), WorkCentre(R), Xerox Nuvera(R), iGen3(R), the Xerox wordmark
and the spherical connection symbol are trademarks of Xerox Corporation in the
United States and/or other countries. DocuColor(R) is used under license.

    Xerox(R), the Xerox wordmark and the spherical connection symbol are
trademarks of Xerox Corporation in the United States and/or other countries.

For further information:

For further information: Media Contacts: Michael Moeller, Xerox
Corporation, (203) 849-2469,; Laura Mergelas, Xerox
Canada, (416) 733-6216,

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