8-K 1 0001.txt 8-K REPORT DATED 04/04/01 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. -------------------------------------------------------------- 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. _____________________________________________________________________________ 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