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Xerox Corporation Michael Herchel ACG2021 Section 008


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Title: Xerox Corporation Michael Herchel ACG2021 Section 008

Xerox CorporationMichael HerchelACG2021 Section
Executive 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
  • Xeroxs 2002 Annual Report can be found at
  • http//

Part A. Introduction
  • Chief Executive Officer
  • Anne M. Mulcahy
  • Location of home office
  • 800 Long Ridge RoadStamford, CT 06904United
  • 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).

Part 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.

Part 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

Part 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

DocuColor System
DocuPrint System
Part 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)
Part 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

Part 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

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
Part 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
Part 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)
Part E. Financial AnalysisSolvency Ratio
2002 2001
Debt to equity ratio 5.0 5.8
Part E. Financial AnalysisMarket Strength Ratios
2002 2001
Earnings per share 0.02 -0.15
Dividend yield 0. 28 0.25