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):
April 4, 2001
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 yesterday an agreement with a financing partner to
provide on-going, exclusive equipment financing to Xerox customers in Denmark,
Sweden, Finland and Norway. Registrant is selling its existing portfolio of
lease receivables for these countries to the partner for approximately $370
million in cash with $285 million received yesterday.
"Today's announcement is the first important step in the company's plan to
transition customer equipment financing to third-party vendors," said Paul A.
Allaire, chairman and chief executive officer. "The combination of exiting
equipment financing, asset sales and operational cash improvements is at the
core of restoring the financial strength of Xerox."
Allaire also confirmed that the completion of this transaction raises
Registrant's current worldwide cash balance to approximately $3.1 billion
available to meet financial obligations.
In October of last year, Registrant announced its plan to move to third-party
equipment financing as part of its turnaround plan. Over time, this is
expected to remove as much as $11 billion in equipment financing-related debt
from Registrant's balance sheet. Registrant also confirmed that negotiations
continue with several potential vendors in other countries, including the
United States, to complete this transition.
"This partnership both enhances Xerox's liquidity and guarantees that Xerox's
Nordic customers continue to receive the financing services they require when
purchasing any of Xerox's wide range of innovative products," said Barry D.
Romeril, Registrant's chief financial officer. "Our financing partner's
purchase of Xerox's Nordic lease receivables for essentially full value
exemplifies the quality of Xerox's existing portfolio. The landmark agreement
is a clear indication of the company's progress in executing on one of the key
elements of our turnaround strategy. "
The long-term agreement includes the transfer of up to 20 administrative
employees who will help ensure the seamless transition of financing
operations.
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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 Current Report on 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% of the Registrant's revenues. This segment of the market 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.
Customer Financing Activities - On average, 75 - 80 percent of the
Registrant's equipment sales are financed through the Registrant. To fund
these arrangements, the Registrant must access the credit markets and the
long-term viability and profitability of its customer financing activities is
dependent on its ability to borrow and its cost of borrowing in these markets.
This ability and cost, in turn, is dependent on the Registrant's credit
ratings. Currently the Registrant's credit ratings are such as to effectively
preclude its ready access to capital markets and the Registrant is currently
funding its customer financing activity from cash on hand. There is no
assurance that the Registrant will be able to continue to fund its customer
financing activity at present levels. The Registrant is actively seeking third
parties to provide financing to its customers.
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 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 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. Our ability to enter
into new foreign exchange contracts to manage foreign exchange risk is
currently severely limited, and we anticipate increased volatility in our
results of operations due to changes in foreign exchange rates.
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 and usage growth (i.e., an increase
in the number of hard copy images produced by customers). 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. The ability to grow usage may be adversely
impacted by the movement towards distributed printing and electronic
substitutes. Our inability to attain a consistent trend of revenue growth
could materially affect the trend of our actual results.
Turnaround Plan - In October 2000, the Registrant announced a turnaround plan
which includes a wide-ranging plan to generate cash, return to profitability
and pay down debt. The success of the turnaround plan is dependent upon
successful and timely sales of assets, restructuring the cost base, placement
of greater operational focus on the core business and the transfer of the
financing of customer equipment purchases to third parties. Cost base
restructuring is dependent upon effective and timely elimination of employees,
closing and consolidation of facilities, outsourcing of certain manufacturing
and logistics operations, reductions in operational expenses and the
successful implementation of process and systems changes.
The Registrant's liquidity is dependent on the timely implementation and
execution of the various turnaround plan initiatives as well as its ability to
generate positive cash flow from operations and various financing strategies
including securitizations. Should the Registrant not be able to successfully
complete the turnaround plan, including positive cash generation on a timely
or satisfactory basis, the Registrant will need to obtain additional sources
of funds through other operating improvements, financing from third parties,
or a combination thereof.
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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
Date: April 5, 2001