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):
March 31, 2000
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 (or Xerox or the company) today announced details of a worldwide
restructuring program designed to enhance shareholder value and strengthen the
company's competitive position in the digital marketplace. The program, first
announced by Xerox President and CEO Rick Thoman in December, touches
virtually every area of the business.
The actions enable the company to align its cost structure with the unique
requirements of its two core business models, General Markets and Industry
Solutions. Through General Markets Operations (GMO) Xerox sells printers,
copiers, and multifunction devices through indirect channels to home, small
and medium-sized offices. The Industry Solutions Operations (ISO) business
focuses on delivering high-value document solutions to larger customers
through the Xerox worldwide direct sales force.
Under the program, Xerox will take a pre-tax charge of approximately $625
million in the first quarter. This charge includes severance costs related to
the elimination of 5,200 positions through a combination of voluntary programs
and layoffs. None of the reductions will reduce sales coverage or affect
direct research and development. The charge also includes $175 million
related to facility closings and other asset write-offs such as scrapping
certain inventory.
The restructuring savings, net of implementation costs, are expected to be
approximately $95 million in 2000 and an incremental $300 million in 2001.
These savings will not be reinvested; however, they provide some opportunity
for accelerating the pace of growth in the inkjet business.
"We must focus on the challenges and opportunities in creating shareholder
value in today's digital economy. While these are difficult actions for our
people, Xerox can no longer operate business as usual and expect to win," said
Thoman. "We're intensifying our drive to become a faster, leaner and more
flexible enterprise - able to respond swiftly and efficiently to customers'
needs with breakthrough technology and exceptional service. This program is
aimed at eliminating activities not associated with core business functions
and strengthening the areas that fuel Xerox' growth."
The employment cuts are wide-ranging, impacting all levels, business groups
and geographic regions of the corporation. Actual implementation will vary
depending on the individual needs of the business groups, union agreements,
government policies and local leadership.
"Over the past two years, we have made progress in improving productivity and
reducing general and administrative expenses," Thoman added. "But we need to
go further. With the initiatives announced today, we will. Although we
expect recent currency movement will offset most of the savings this year,
this positions us for mid to high teens earnings growth in 2001."
The productivity initiatives that will be implemented over the next 12 months
include:
- -- Sharpening the company's focus on cost, quality and delivery in
manufacturing by reducing the production infrastructure and moving certain
product lines to regions where they are in the greatest customer demand.
- -- Driving greater efficiency in logistics and supply chain operations
through the consolidation of distribution centers and warehouses, reducing
costs and improving inventory turns.
- -- Enhancing customer service delivery by deploying technology and executing
process changes to reduce costs.
- -- Implementing an average 10 percent reduction in the number of middle and
upper managers across the various Xerox businesses in the United States, with
similar reductions in other geographic areas.
- -- Eliminating redundancies in support functions by moving to a shared
service model for marketing, human resources and finance.
- -- Outsourcing work in areas not related to the company's core business
operations and where there is economic advantage.
- -- Accelerating the integration of business functions in General Markets
Operations to achieve benchmark expenses and processes for indirect sales
channels.
- -- Implementing a wide-ranging series of initiatives across Developing
Markets Operations (DMO) geographies to improve productivity and cost levels.
- -- Leveraging Web-based technology to simplify and streamline processes
across internal business operations, and extending to vendor and customer
relationships.
"By making strategic investments, leveraging Xerox technology, simplifying
business processes and attacking the cost base, we are dedicated to building
our business faster and enhancing our competitive position," said Thoman. "We
will continue to lead the digital office transition and push aggressively in
three strategic fast-growth areas -- production publishing solutions, document
outsourcing, and the exploding small office/home office market."
In the past six months, Xerox has made major moves in these areas including
the acquisition of Tektronix' color printing division, the launch of a $2
billion alliance with Sharp and Fuji Xerox to develop and manufacture inkjet
products for small and home offices, and the introduction of next-generation
DocuTech and DocuColor production publishing systems.
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Forward-Looking Statements
From time to time Registrant and its representatives may provide information,
whether orally or in writing, including certain statements in this 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 general
office 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.
Financing Business - a significant portion of the Registrant's profits arise
from the financing of its customers' purchases of the Registrant's equipment.
On average, 75 to 80 percent of equipment sales are financed through the
Registrant. The Registrant's ability to provide such financing at competitive
rates and realize profitable spreads is highly dependent upon its own costs of
borrowing which, in turn, depend upon its credit ratings. The Registrant's
present credit ratings permit ready access to the credit markets. There is no
assurance that these credit ratings can be maintained and/or ready access to
the credit markets can be assured. In December 1999, Moody's Investors
Service, Inc. announced that the long and short term credit ratings of the
Company and its financially supported subsidiaries are under review for
possible downgrade, Standard & Poor's announced a negative outlook for the
Company's and Xerox Credit Corporation's ratings and Fitch IBCA, Inc. placed
the Company's and its subsidiaries' debt ratings on "RatingAlert-Negative". A
downgrade or lowering in such ratings could reduce the profitability of such
financing business and/or make the Registrant's financing less attractive to
customers thus reducing the volume of financing business done.
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.
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.
Restructuring - the Registrant's ability to ultimately reduce pre-tax annual
expenditures by approximately $1 billion is dependent upon its ability to
successfully implement the 1998 restructuring program including the
elimination of 9,000 net jobs worldwide, the closing and consolidation of
facilities, and the successful implementation of process and systems changes.
Furthermore, the Registrant's ability to realize additional cost savings and
productivity improvements above those identified in the 1998 restructuring
program are dependant on successful identification and implementation of
initiatives for the 2000 restructuring program, which was announced on March
31, 2000.
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. 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. Our inability to attain a consistent trend of revenue growth could
materially affect the trend of our actual results.
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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
Dated: March 31, 2000
