Large Format Review - Business News

Q4 marks company's return to profitability and cash generation, delivering $0.05 of non-GAAP EPS

Foster City, Calif. - Electronics For Imaging, Inc., a world leader in customer-focused digital printing innovation, today announced its results for the fourth quarter of 2009. For the quarter ended December 31, 2009, the Company reported revenues of $114.0 million, compared to fourth quarter 2008 revenue of $135.3 million.

GAAP net loss was $(3.4) million or $(0.07) per diluted share in the fourth quarter of 2009, compared to a GAAP net loss of $(104.5) million or $(2.03) per diluted share for the same period in 2008.

GAAP net loss was $(2.2) million or $(0.04) per diluted share for the twelve months ended December 31, 2009, compared to a GAAP net loss of $(113.4) million or $(2.16) per diluted share for the same period in 2008.

Non-GAAP net income was $2.3 million or $0.05 per diluted share in the fourth quarter of 2009, compared to non-GAAP net income of $6.7 million or $0.13 per diluted share for the same period in 2008.

Non-GAAP net loss was $(10.7) million or $(0.22) per diluted share for the twelve months ended December 31, 2009, compared to non-GAAP net income of $41.2 million or $0.74 per diluted share for the same period in 2008.

"Our results continue to show improvement as we delivered 13% sequential revenue growth driven by a strong rebound in our Fiery business posting 26% quarter over quarter growth. In addition, we delivered on our commitment to return to profitability and generate cash in the fourth quarter," said Guy Gecht, CEO of EFI. "As we look to 2010, we will be focused on profitable growth while continuing to provide the print industries' most innovative technology."

Xerox Corporation announced today fourth-quarter 2009 results that include GAAP earnings per share of 20 cents, adjusted earnings per share of 25 cents and $967 million in operating cash flow. The adjusted EPS excludes a previously disclosed charge for acquisition-related costs of 5 cents per share.

"We delivered a strong close to a difficult year, with solid operational results that reflect our disciplined approach to generating cash and reducing costs," said Ursula Burns, Xerox chief executive officer.

"During the fourth quarter, we saw signs of improvement in several areas including developing markets, and we remain quite confident in our strong global competitive position," she added. "However, we believe revenue will continue to be under pressure until there is a more sustainable economic recovery. To help offset this challenge, we remain focused on cost and expense management and sizing our business to better match current revenue levels."

The company reported fourth-quarter total revenue of $4.2 billion, down 3 percent from fourth-quarter 2008 including a 4 point benefit from currency. Equipment sale revenue declined 11 percent or 15 percent in constant currency. Post-sale and financing revenue was flat, or declined 4 percent in constant currency.

"We're encouraged by improving trends in our post-sale revenue and continued strong signings for Xerox's managed print services that help our clients reduce their document costs," said Burns. "The increasing demand for services supports the benefits of our acquisition of Affiliated Computer Services. We're on track to close the acquisition next month. Once completed, Xerox will be the world leader in business process and document management."

Gross margin was 39.9 percent in the fourth quarter, an increase of two points from the prior year. Selling, administrative and general expenses were up year over year by $23 million driven by currency, and SAG as a percent of revenue was 26.7 percent in the fourth quarter.

The company's full-year 2009 net income was $485 million, including after-tax acquisition-related costs of $49 million. Total revenue was $15.2 billion, down from $17.6 billion in 2008.

Xerox generated $2.2 billion of operating cash flow in 2009, exceeding its full-year expectations by $500 million. Total debt was reduced by $1.1 billion in 2009, excluding the $2 billion of ACS-related notes issued last month. The company ended the year with a cash balance of $3.8 billion.

During the first quarter of 2010, Xerox expects to take a pre-tax restructuring charge of approximately $250 million to continue implementing its cost-reduction activities on a global basis. Including ACS results, Xerox expects full-year 2010 GAAP earnings in the range of 36 to 46 cents per share. Adjusted EPS is expected to be 75 to 85 cents per share, which excludes restructuring, adjustments related to the ACS acquisition and other discrete items.

 

Agfa has successfully finalised the recent acquisitions, announced in November 2009.

The Agfa Graphics business group acquired most of the assets of Gandi Innovations Holdings LLC's North American operations and the shares of its principal foreign subsidiaries. Gandi Innovations is a global leader in large format inkjet systems.

The Agfa HealthCare business group acquired Insight Agents GmbH., a European developer and producer of contrast media.

 

Deal with Ireland's largest digital imaging and printing solutions company increases Xerox's European distribution

Norwalk, Conn. - Xerox Corporation today announced the acquisition of Irish Business Systems (IBS), for approximately $31 million, expanding its reach into the small and mid-sized business (SMB) market in Ireland. IBS, with eight offices located throughout Ireland, is a managed print services provider and the largest independent supplier of digital imaging and printing solutions in Ireland.

By acquiring Irish Business Systems, Xerox will increase its sales force and gain access to more than 11,000 new customers in Ireland. Over the last two years, Xerox has expanded its distribution to the SMB market and managed print services delivery capability through acquisitions and broadened relationships with resellers and concessionaires in Europe.

IBS will sell the full range of Xerox office and light production products and supplies, including all Phaser, WorkCentre and the ColorQube 9200 Series of multifunction printers that print, copy, fax and scan.

"With this acquisition, Xerox will increase its presence in all parts of Ireland," said Douraid Zaghouani, senior vice president, European Channels Group, Xerox Europe. "IBS is a strong office technology and managed print services provider in Ireland. Their extensive distribution and customer support complement the benefits of Xerox's technology and solutions."

IBS will operate as a wholly owned subsidiary of Xerox, will maintain its name and keep its headquarters in Cork, Republic of Ireland. Its management team and employees will continue to operate as part of IBS. The acquisition, Xerox's 8th in the past two years, is an all-cash transaction.

Xerox currently employs over 700 people in the Republic of Ireland and Northern Ireland, in Dublin, Belfast and Dundalk, who are engaged in manufacturing, technical support, finance and treasury and sales and marketing activities.

On January 12, a powerful earthquake struck the Republic of Haiti, causing extensive destruction and loss of life. We at Canon extend our heartfelt condolences to all those affected by this disaster and our thoughts go out to those suffering in its aftermath.

While we realise that the road to recovery will be challenging and time-consuming, we hope that the region will soon be able to begin the rebuilding and healing process.

The Canon Group is contributing in the relief efforts for victims of the earthquake through donations to the Japanese Red Cross Society and other humanitarian aid organizations totaling 20 million yen (approximately GBP £140,000).

Bloomberg have today reported that Canon Inc.’s $1.1 billion bid for Oce NV may be in jeopardy after holders of 13 percent of the Dutch company said they won’t tender their shares and a group representing about 200 investors said the offer was too low.

Hermes Focus Asset Management Ltd., with 3.3 percent, said on Jan. 11 it won’t tender its shares, calling the Canon offer “meager.” Orbis Funds, with about 10 percent of Oce, in November rejected Canon’s bid. Investor group VEB, which represented 211 shareholders with about 0.003 percent of Oce at its last shareholders meeting, judged the bid too low.

Tokyo-based Canon, the world’s largest camera maker, may have to raise its offer or lower its minimum threshold to below 85 percent of Oce’s outstanding shares to see the deal through should more investors oppose it. With the takeover, Canon is seeking to expand its printer operations and widen its lead in the global market for office equipment.

“If Canon’s determination for completion of the transaction is strong, it’s possible the company will add some premium after discussing with Oce’s investors,” said Hisashi Moriyama, a Tokyo-based analyst at JPMorgan Chase & Co. “On the other hand, Canon could drop the plan, if the company judges adding premiums isn’t merited.”

Canon in November agreed to buy Oce, the world’s largest maker of wide-format printers, for about 730 million euros ($1.1 billion) in cash. The company said Nov. 16 it would pay 8.60 euros a share, or 70 percent higher than Venlo, Netherlands- based Oce’s last closing price.

 

‘Not in a Hurry’

“We believe we are offering an adequate price,” Ichisei Hanada, a spokesman for Canon, said yesterday. “There’s no change to our plan to start the offer by March 31,” he said. Canon hasn’t received letters from investors similar to those from Hermes and Orbis, he said.

Oce, which yesterday reported a fourth-quarter net loss of 23 million euros, fell 0.02 percent in Amsterdam yesterday to 8.59 euros, close to the Canon offer price.

“Looking at the share price, investors are not anticipating the bid will be raised,” said Niels de Zwart, an Amsterdam-based analyst at Fortis Bank Nederland. “The market seems to think: This bid will go ahead at 8.60 euros, no matter what these shareholders are saying.”

Since Canon has indicated that it will largely let Oce operate on a stand-alone basis in the first three years, it “may not be in a hurry to get 100 percent of the shares,” said De Zwart, who has a “sell” rating on Oce.

He said it is unlikely Canon will withdraw its bid entirely. “Canon aims to become the number 1 in printing and to get there, they need Oce.”

 

Canon Supporters

The deal would be Canon’s biggest purchase, giving it control of the world’s largest maker of machines that make blueprints and advertising posters. Ricoh Co., Japan’s second- biggest maker of office equipment, in 2008 agreed to buy Malvern, Pennsylvania-based Ikon Office Solutions Inc.

Canon’s offer was 1.2 times Oce’s projected book value per share for the year ending November, according to the average of six analyst estimates. That was in line with projected multiples at office equipment makers such as Xerox Corp. and Brother Industries Ltd.

Ducatus NV, ASR Nederland NV and ING Groep NV, which hold about 19 percent of Oce’s share capital, have agreed to sell their stakes to Canon, Oce said Nov. 16. Bestinver Gestion SA, holder of about 9.5 percent of the outstanding stock, provided an irrevocable undertaking to tender. Canon said on Dec. 1 that it held 25.3 percent of Oce’s ordinary shares.

 

‘Weakness’

Pictet & Cie, Sparinvest funds and Stichting Pensioenfonds ABP, which own about 5 percent each of Oce, according to Bloomberg data, declined to comment on whether they plan to tender their shares.

The Dutch shareholder association VEB said the price doesn’t fully reflect the savings that can be expected when Oce operates within a stronger group.

“Oce was negotiating from a position of weakness,” David Tomic, a spokesman for VEB, said in a telephone interview yesterday. “That makes it unlikely that a good price was offered.”

Orbis Funds, the Bermuda-based manager of $20 billion in assets that challenged Warren Buffett’s bid for Clayton Homes Inc. in 2003 and led investors in pressuring Citigroup Inc. to raise its offer for Nikko Cordial Corp., in November rejected Canon’s bid. The fund said Canon’s offer “significantly undervalues” Oce’s assets.

 

No Counterbid

Hermes this week said Canon’s indicative bid was “a meager representation of the true value of Oce, when profitability potential and the depressed share price are put into a proper perspective.”

“Following integration with Canon, and with profitability in line with industry standards, the company’s equity would indicatively be worth some 75 percent more than the offer price,” Hermes said.

Oce’s management said it still supports the takeover.

Fortis’s De Zwart said it’s unlikely there will be a counter offer for Oce.

“A bidding war is unlikely as other potential buyers already indicated they are not interested,” he said. Konica Minolta Holdings Inc., the Japanese lens and office-equipment maker, on Nov. 17 said it had no plan to counter Canon’s offer.