Xerox Q4 Profit Up, To Split Into Two Companies, Give Icahn Three Board Seats

(RTTNews) - Xerox Corp. (XRX) reported a net income attributable to the company for the fourth-quarter that increased 43% from last year. Xerox plans to separate the company into two independent publicly-traded companies. Billionaire investor Carl Icahn will be getting three seats on the company's board.

The company also announced a three year strategic transformation program targeting a cumulative $2.4 billion savings across all segments.

Adjusted earnings topped analysts' expectations, while revenue missed their estimates.

In pre-market, XRX is currently trading at $9.42, up $0.19 or 2.06%.

For the first quarter of 2016, Xerox expects GAAP earnings of $0.05 to $0.08 per share and adjusted earnings per share of $0.21 to $0.24 per share. Analysts project first-quarter earnings of $0.21 per share.

For full-year 2016, Xerox expects GAAP earnings of $0.66 to $0.76 per share. The full-year 2016 adjusted earnings per share guidance is expected to be $1.10 to $1.20 per share. Analysts expect annual earnings of $0.99 per share.

Net income attributable to the company for the fourth-quarter 2015 increased to $285 million or $0.27 per share from $200 million or $0.17 per share in the prior year.

Fourth quarter 2015 net income from continuing operations attributable to Xerox was $285 million, or $0.27 per share. On an adjusted basis, net income from continuing operations attributable to Xerox was $333 million, or $0.32 per share. Analysts polled by Thomson Reuters expected the company to report earnings of $0.28 per share for the quarter. Analysts' estimates typically exclude special items.

Fourth quarter 2014 net income from continuing operations attributable to Xerox was $349 million, or $0.30 per diluted share. On an adjusted basis, net income from continuing operations attributable to Xerox was $357 million, or $0.31 per share.

Total revenues were $4.65 billion in the quarter, down 8 percent or 5 percent in constant currency year-over-year. Annuity revenue was 83 percent of total revenue.

Today, the company announced that its board of directors has declared an 11 percent increase in the company's quarterly cash dividend to 7.75 cents per share on Xerox common stock. The dividend is payable on April 29, 2016 to shareholders of record on March 31, 2016.

In 2016, Xerox will continue its practice of returning value to shareholders. It expects to use more than 50 percent of its free cash flow for share repurchases and dividends.

In a separate press release, Xerox said that its board has unanimously approved management's plan to separate Xerox into two independent publicly- traded companies. They are the Document Technology company, the Business Process Outsourcing company. Xerox's objective is to complete the separation by year-end, subject to customary conditions, receipt of regulatory approvals, tax considerations, securing any necessary financing and final approval of the Xerox Board.

Until the separation is complete, Xerox will continue to operate as a single company and it will continue to be business as usual for our customers and employees.

Xerox said that the Document Technology company will lead the market with superior technology, solutions and innovations that optimize document management in an increasingly interconnected, digital world.

Xerox noted that the Business Process Outsourcing company will be an industry leader that helps clients improve the flow of work by leveraging its expertise in managing transaction-intensive processes and applying innovations to automate and simplify business processes. With approximately $7 billion in 2015 revenue - more than 90% of which is annuity based - the company is focused on attractive growth markets including transportation, healthcare, commercial and government services.

The leadership and names of the two companies will be determined as the separation process progresses.

Xerox also announced a three year strategic transformation program targeting a cumulative $2.4 billion savings across all segments. The program is inclusive of ongoing activities and $600 million of incremental transformation initiatives. The company expects $700 million in annualized savings in 2016.

Separately, Xerox and Carl Icahn announced that they have entered into an agreement related to the governance of the Business Process Outsourcing or "BPO" company that will be created as a result of the planned separation of Xerox into two independent, publicly-traded companies.

As per the agreement, when the separation is complete, the BPO company will have certain best-in-class corporate governance provisions and a Board of Directors composed of nine members: six directors selected by Xerox (two of whom may come from the current Xerox Board of Directors) and three directors selected by Icahn.

In addition, Xerox agreed that a committee of its Board of Directors will begin searching for an external candidate to be Chief Executive Officer of the BPO company and to allow a person selected by Icahn to observe and advise the committee in that search process.