Title: Xerox Corporation Michael Herchel ACG2021 Section 008
1Xerox CorporationMichael HerchelACG2021 Section
008
2Executive Summary
- With the advent of the computer dot-com bust,
Xerox was deep in the red. However, by exiting
losing markets and selling unneeded assets, Xerox
has returned to profitability from a 94 million
dollar net loss to a 91 million dollar net income
between the years of 2001 and 2002. Xeroxs gross
margins have improved and its future is looking
brighter. - Xeroxs 2002 Annual Report can be found at
- http//a1851.g.akamaitech.net/f/1851/2996/24h/cach
e.xerox.com/downloads/usa/en/i/ir_annualreport2002
.pdf
3Part A. Introduction
- Chief Executive Officer
- Anne M. Mulcahy
- Location of home office
- 800 Long Ridge RoadStamford, CT 06904United
States - Ending date of latest fiscal year
- December 31, 2002
- Xerox provides document solutions for all types
of business. Xerox's products include digital
network printers and photocopiers, copy machines,
scanners, fax machines, multipass multifunction
printers, office supplies, document management
software, business consulting and services. - Xerox's main geographic centers of activity are
the United States (with 62.5 of Total Revenue)
and Europe (with 27.9 of Total Revenue).
4Part A. Audit Report
- Xeroxs independent auditor is PricewaterHouseCoop
ers LLP, - PricewaterHouseCoopers, LLP said that in their
opinion the financial statements accurately
represents the financial position of Xerox at
December 31st, 2002 and 2001. The financial
statements conform to the generally accepted
accounting principles in the United States.
Xerox's Financial Statements are the
responsibility of Xerox's management, while
PricewaterhouseCooper's responsibility is to
audit and report on these statements.
5Part A. Stock Market Information
- The current stock price for XRX as of 2/25/2004
is 13.93 - The twelve month trading range for Xeroxs Stock
is 8.40 - 15.54 - Dividend per share 0.04
- Date of this information February 25th, 2004
- Your opinion about the company stock as an
investment? HOLD
6Part B. Industry Situation and Company Plans
- Xeroxs industry is on a general downturn due to
the increased usage of electronic media. For
example, people are electing to have their bank
statements emailed to them instead of printed and
mailed. This cuts directly into Xeroxs
production printing (Docutech) revenue. - To remain profitable, Xerox must either 1) cut
expenses (see the income statement and this
article) 2) expand into new markets (See
Opportunities for Growth on Page 4 of Xeroxs
annual report PDF file in addition to this news
article).
DocuColor System
DocuPrint System
7Part C. Income Statement
- Xerox presents a Multistep Income Statement
within the 2002 annual report. - The 185 million dollar increase in net income can
be attributed to the abandonment of the InkJet
business segment, selling assets totaling
approximately 2.7 billion, and implementing
actions to reduce costs by 1.7 billion.
2002 2001
Gross Profit 2,555 2,273
Income from Operations (8845) (9171)
Net Income 91 (94)
8Part C. Balance Sheet
(in millions)
Assets Liabilities Stock Holders Equity Assets Liabilities Stock Holders Equity Assets Liabilities Stock Holders Equity Assets Liabilities Stock Holders Equity
2002 25,458 21,283 4,175
2001 27,645 23,618 4,027
- Total cash decreased by 28. This is offset by
the total short-term liabilities decreasing by 34
9Part D. Accounting Policies
- Significant accounting policies relating to
revenue recognition, - cash, short-term investments, inventories, and
property and equipment
- The consolidated financial statements include the
accounts of Xerox Corporation and all of its
controlled subsidiary companies. - Xerox sells most of its products and services
under bundled contract arrangements, which
contain multiple deliverable elements. - Due to Xerox's credit ratings, many of its
derivative contracts and several other material
contracts require it to post cash collateral or
maintain minimum cash balances in escrow. - Xerox sponsors pension plans in various forms
and in various countries covering substantially
all employees who meet certain eligibility
requirements.
Topics of the notes to the financial statements
Note 1 Summary of Significant Accounting
Policies Note 2 Restructuring Programs Note 3
Acquisitions Note 4 Divestitures and Other
Sales Note 5 Receivables, Net Note 6
Inventories and Equipment on Operating Leases,
Net Note 7 Land, Buildings and Equipment,
Net Note 8 Investments in Affiliates, at
Equity Note 9 Segment Reporting Note 10 Net
Investment in Discontinued Operations
Note 11 Debt Note 12 Financial
Instruments Note 13 Employee Benefit Plans Note
14 Income and Other Taxes Note 15 Litigation,
Regulatory Matters and Other Contingencies Note
16 Preferred Securities Note 17 Common
Stock Note 18 Earnings Per Share Note 19
Financial Statements of Subsidiary Guarantors
10Part E. Financial AnalysisLiquidity Ratios
(in millions, unless otherwise stated)
2002 2001
Working Capital 3,232 2,613
Current Ratio 1.12 1.26
Receivable turnover 7.65 times 8.97 times
Average days sales uncollected 47.7 days 40.7days
Inventory turnover 3.43 times 3.79 times
Average days inventory on hand 106 days 96 days
11Part E. Financial AnalysisProfitability Ratios
2002 2001
Profit margin 0.59 (0.55)
Asset turnover 0.62 times 0.61 times
Return on assets 0.35 (0.34)
Return on equity 2.1 (2.3)
12Part E. Financial AnalysisSolvency Ratio
2002 2001
Debt to equity ratio 5.0 5.8
13Part E. Financial AnalysisMarket Strength Ratios
2002 2001
Earnings per share 0.02 -0.15
Dividend yield 0. 28 0.25