Summary Results
Revenue
Revenues for the three years ended December 31, 2008 were as follows:
| Year Ended December 31, | Percent Change | |||||||||||||||
| (in millions) | 2008 | 2007 | 2006 | 2008 | 2007 | |||||||||||
|
Equipment sales |
$ | 4,679 | $ | 4,753 | $ | 4,457 | (2)% | 7% | ||||||||
|
Post sale revenue(1) |
12,929 | 12,475 | 11,438 | 4 % | 9% | |||||||||||
|
Total Revenue |
$ | 17,608 | $ | 17,228 | $ | 15,895 | 2 % | 8% | ||||||||
| Reconciliation to Consolidated Statements of Income | ||||||||||||||||
|
Sales |
$ | 8,325 | $ | 8,192 | $ | 7,464 | ||||||||||
|
Less: Supplies, paper and other sales |
(3,646 | ) | (3,439 | ) | (3,007 | ) | ||||||||||
|
Equipment sales |
$ | 4,679 | $ | 4,753 | $ | 4,457 | ||||||||||
|
Service, outsourcing and rentals |
$ | 8,485 | $ | 8,214 | $ | 7,591 | ||||||||||
|
Finance income |
798 | 822 | 840 | |||||||||||||
|
Add: Supplies, paper and other sales |
3,646 | 3,439 | 3,007 | |||||||||||||
|
Post sale revenue |
$ | 12,929 | $ | 12,475 | $ | 11,438 | ||||||||||
|
Memo: Color(3) |
$ | 6,669 | $ | 6,356 | $ | 5,578 | 5% | 14% | ||||||||
Total 2008 revenue increased 2% compared to the prior year and was flat when including GIS in our 2007 results.(2) Currency had a 1-percentage point positive impact on total revenues. Total revenues included the following:
|
• |
4% increase in post sale revenue, or 2% including GIS in our 2007 results.(2) This included a 1-percentage point benefit from currency. Growth in GIS, color products and document management services offset the declines in high-volume black-and-white printing systems, black-and-white multifunction devices and light lens product revenue. The components of post sale revenue increased as follows: |
| – | 3% increase in service, outsourcing, and rentals revenue to $8,485 million reflected the full year inclusion of GIS, and growth in document management services. |
| – | Supplies, paper, and other sales of $3,646 million grew 6% year-over-year due to the full year inclusion of GIS as well as growth in color supplies and paper sales. |
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• |
2% decrease in equipment sales revenue. There was no impact from currency on equipment sales revenue. When including GIS in our 2007 results,(2) equipment sales revenue decreased 5%, with a 1-percentage point benefit from currency. Overall price declines of between 5%–10% as well as product mix more than offset overall growth in install activity. |
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• |
5% growth in color revenue.(3) Color revenue of $6,669 million in 2008 represented 41% of total revenue, excluding GIS, compared to 39% in 2007 reflecting: |
|
– |
10% growth in color post sale revenue to $4,590 million. Color post sale revenue represented 37% and 35% of post sale revenue, in 2008 and 2007, respectively.(4) |
|
– |
Color equipment sales revenue declined 4% to $2,079 million. Color equipment sales represented 50% of total equipment sales, in 2008 and 2007,(4) respectively. |
|
– |
24%(5) growth in color pages. Color pages represented 18%(5) and 12% of total pages in 2008 and 2007, respectively. |
Total 2007 revenue increased 8% compared to the prior year and includes the results of GIS since May 9, 2007, the effective date of our acquisition. When including GIS in our 2006 results,(2) our 2007 total revenue increased 4%. Currency had a 3-percentage point positive impact on total revenues. Total revenues included the following:
|
• |
9% increase in post sale revenue, or 6% including GIS in our 2006 results.(2) This included a 3-percentage point benefit from currency. Growth in GIS, color products, developing markets and document management services more than offset the decline in black-and-white digital office revenue and light lens product revenue. The components of post sale revenue increased as follows: |
| – | 8% increase in service, outsourcing and rentals revenue to $8,214 million reflected the inclusion of GIS, growth in document management services and technical service revenue. |
| – | Supplies, paper and other sales of $3,439 million grew 14% year-over-year due to the inclusion of GIS as well as growth in developing markets. |
|
• |
7% increase in equipment sales revenue, or a decrease of 1% when including GIS in our 2006 results.(2) This included a 3-percentage point benefit from currency. Growth in office multifunction color and production color install activity was offset by overall price declines of between 5%-10%, declines in production black-and-white products and color printers, as well as an increased proportion of equipment installed under operating lease contracts where revenue is recognized over-time in post sale. |
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• |
14% growth in color revenue.(3) Color revenue of $6,356 million in 2007 comprised 39% of total revenue, compared to 35% in 2006 reflecting: |
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18% growth in color post sale revenue to $4,180 million. Color post sale revenue represented 35% and 31% of post sale revenue, in 2007 and 2006, respectively.(4) |
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– |
7% growth in color equipment sales revenue to $2,176 million. Color equipment sales represented 49% and 45% of total equipment sales, in 2007 and 2006, respectively.(4) |
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– |
31% growth in color pages. Color pages represented 12% and 9% of total pages in 2007 and 2006, respectively.(4) |
|
(1) |
Post sale revenue is largely a function of the equipment placed at customer locations, the volume of prints and copies that our customers make on that equipment, the mix of color pages and associated services. |
|
(2) |
The percentage point impacts from GIS reflect the revenue growth year-over-year after including GIS’s results for 2007 and 2006 on a proforma basis. See “Non-GAAP Financial Measures” section for an explanation of this non-GAAP measure. |
|
(3) |
Color revenues represent a subset of total revenues and excludes the impact of GIS’s revenues. |
|
(4) |
As of December 31, 2008, total color, color post sale and color equipment sales revenues comprised 41%, 37% and 50%, respectively, if calculated on total, total post sale, and total equipment sales revenues, including GIS. GIS is excluded from the color information presented, because the breakout of the information required to make this computation for all periods is not available. |
|
(5) |
Pages include estimates for developing markets, GIS and printers. |
Net Income
Net income and diluted earnings per share for the three years ended December 31, 2008 were as follows:
| (in millions, except per share amounts) | 2008 | 2007 | 2006 | ||||||
|
Net income |
$ | 230 | $ | 1,135 | $ | 1,210 | |||
|
Diluted earnings per share |
$ | 0.26 | $ | 1.19 | $ | 1.22 | |||
2008 Net income of $230 million, or $0.26 per diluted share, included the following:
- $491 million after-tax charges ($774 million pre-tax) associated with securities-related litigation matters as well as other probable litigation-related losses including $36 million for the Brazilian labor-related contingencies.
- $292 million after-tax charge ($426 million pre-tax) for second, third and fourth quarter 2008 restructuring and asset impairment actions.
- $24 million after-tax charge ($39 million pre-tax) for an Office product line equipment write-off.
- $41 million income tax benefit from the settlement of certain previously unrecognized tax benefits.
2007 Net income of $1,135 million, or $1.19 per diluted share, included $30 million after-tax charge for our share of Fuji Xerox (“FX”) restructuring charges.
2006 Net income of $1,210 million, or $1.22 per diluted share, included the following:
- $472 million income tax benefit related to the favorable resolution of certain tax matters from the 1999-2003 IRS audit.
- $68 million (pre-tax and after-tax) for probable losses on Brazilian labor-related contingencies.
- $46 million tax benefit resulting from the resolution of certain tax matters associated with foreign tax audits.
- $9 million after-tax ($13 million pre-tax) charge from the write-off of the remaining unamortized deferred debt issuance costs as a result of the termination of our 2003 Credit Facility.
- $257 million after-tax ($385 million pre-tax) restructuring and asset impairment charges.