Printer and copier company Xerox Corp. (XRX) reported Wednesday a decline in profit for the fourth quarter, as significant charges more than offset a 42% revenue growth.
Adjusted earnings per share for the quarter rose 11 percent, and topped analysts' expectations by a penny, while revenues came in line. The company also provided earnings forecast for the first quarter, in line with consensus, and backed its earnings forecast the full-year 2011.
Separately, Xerox said that its CFO Lawrence Zimmerman will retire next month, and will be succeeded by Luca Maestri, currently the finance chief of Nokia Siemens Networks. Zimmerman will continue with the company as vice chairman until April 1, but Maestri will join the company on February 16.
"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," Chairman and CEO Ursula Burns said in a statement.
The Norwalk, Connecticut-based company reported net income of $171 million for the fourth quarter, down from $180 million in the prior-year quarter, while earnings per share dropped 40 percent to $0.12 from last year's $0.20.
The results for the latest quarter include net charges of $246 million or $0.17 per share, including $178 million or $0.12 per share related to Xerox's share of Fuji Xerox's after-tax restructuring, amortization, acquisition-related costs, while the year-ago quarter included net charges of $55 million or $0.06 per share.
Excluding items, net income for the quarter surged to $417 million or $0.29 per share from $235 million or $0.26 per share in the year-ago quarter.
On average, nine analysts polled by Thomson Reuters expected the company to earn $0.28 per share in the quarter. Analysts' estimates typically exclude special items. The company had forecast earnings per share in the range of $0.28 to $0.29 per share for the fourth quarter.
Total revenues for the quarter surged 42 percent to $5.98 billion from $4.22 billion in the same quarter last year, and came in line with eight Wall Street analysts' consensus estimate of $5.98 billion. On a pro-forma basis, with ACS in the company's results, total revenue grew 2 percent or 3 percent in constant currency.
Sales revenues for the quarter grew 4 percent from the prior-year quarter to $2.07 billion, and service, outsourcing and rental revenues climbed 83 percent from a year ago to $3.75 billion. However, finance income decreased 8 percent to $162 million from the same quarter last year.
On a segment-basis, revenues from technology, which represents the sale of document systems as well as the supplies, technical service and financing of products, remained flat with last year at $2.85 billion. Services revenues, which represents the company's business process, IT and document outsourcing offerings, totaled $2.71 billion, up about three fold from last year.
"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."
Total gross margin for the fourth quarter contracted 630 basis points to 33.6 percent from the prior-year quarter's 39.9 percent.
For fiscal 2010, Xerox reported net income of $606 million or $0.43 per share, compared to net income of $485 million or $0.55 per share in the prior year.
Excluding items, adjusted net income for the year surged to $1.30 billion or $0.94 per share from $613 million or $0.70 per share in the year ago, which was better than analysts estimate of $0.93 per share.
Total revenues for the full year surged 43 percent to $21.63 billion from $15.18 billion in the previous year. The Street was looking for full-year 2010 revenues of $21.64 billion.
Looking ahead to the first quarter of fiscal 2011, Xerox expects earnings in a range of $0.16 to $0.18 per share and adjusted earnings in the range of $0.20 to $0.22 per share. Street analysts currently expect earnings of $0.22 per share for the first quarter.
For fiscal 2011, the company continues to anticipate adjusted earnings between $1.05 and $1.10 per share. Analysts expect the company to report earnings of $1.10 per share for the full-year 2011.
XRX closed Tuesday's regular trading session at $11.40, up $0.19 on a volume of 11.15 million shares, higher than the three-month average volume of 9.42 million shares. In the past 52-week period, the stock has been trading in a range of $7.67 to $12.08.
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