Xerox 2002 Annual Report Download - page 27

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Production: Production revenues include production
publishing, production printing, color products for the
production and graphic arts markets as well as digital
and light-lens copiers over 90 pages per minute, sold
predominantly through direct sales channels in North
America and Europe. Production revenues represented
35 percent (new basis) of both 2002 and 2001 revenues.
2002 Production revenues declined 5 percent from
2001 (new basis), and included a benefit of approxi-
mately 1.5 percentage points from currency. High
single digit declines in Production monochrome rev-
enues were only partially offset by mid-single digit
growth in Production color revenues. Production
monochrome declines reflect continued customer
transition from light-lens to digital equipment, move-
ment to distributed printing and other electronic
media and the weak economy. Growth in Production
color revenue reflects continued strong growth in our
DocuColor®2000 series. The DocuColor 2000 series,
launched in 2000, at speeds of 45 and 60 pages per
minute established an industry standard by producing
near offset-quality, full color prints including cus-
tomized one-to-one printing at a variable cost of less
than 10 cents per page. The series was complemented
by the launch of the DocuColor 6060 during the second
half of 2002. Mid-Range color revenue also increased,
fueled by the successful launch of the DocuColor 1632
and DocuColor 2240 midrange printer/copiers in the
second half of 2002.
2001 Production revenue declined 7 percent (old
basis) from 2000, including an unfavorable one per-
centage point impact due to currency. Production
monochrome revenue declines reflected competitive
product introductions, movement to distributed print-
ing and electronic substitutes, and weakness in the
worldwide economy. Revenue from our DocuTech®
production publishing products, which has been con-
tinually refreshed and expanded since its 1990 launch,
declined in 2001 reflecting the 1999 introduction of a
competitive product. In production printing, we have
maintained our strong market leadership in both 2002
and 2001, however, revenue decreased reflecting
declines in the transaction printing market. 2001 pro-
duction color revenues increased 2 percent (old basis)
from 2000, including strong DocuColor 2000 series
growth, partially offset by declines in older products
reflecting introduction of competitive offerings and
the effects of the weakened worldwide economy in
the second half of the year.
2002 Production operating profit of $625 million
(new basis) improved $159 million from 2001 and
operating margin expanded 3.2 percentage points to
11.1 percent reflecting improvements in gross margin
and lower SAG including reduced bad debt levels.
2001 Production operating profit was similar to
2000 and the operating margin improved to 7.7 per-
cent (old basis) as we realized benefits from our
Turnaround Program.
New Basis Old Basis
2002 2001 2002 2001 2000
Total Revenue
Production $ 5,615 $ 5,883 $ 5,635 $ 5,899 $ 6,332
Office 6,605 6,910 6,620 6,926 7,060
DMO 1,758 2,026 1,758 2,027 2,619
SOHO 244 410 244 407 599
Other 1,627 1,779 1,592 1,749 2,141
Total $15,849 $17,008 $15,849 $17,008 $18,751
Memo: Color $ 2,803 $ 2,759 $ 2,808 $ 2,762 $ 2,612
Segment Operating Profit (Loss)
Production $ 625 $ 466 $ 613 $ 454 $ 463
Office 498 365 493 341 (180)
DMO 62 (125) 53 (157) (93)
SOHO 82 (195) 82 (197) (293)
Other (289) (143) (263) (73) 225
Total $ 978 $ 368 $ 978 $ 368 $ 122
Operating Margin
Production 11.1% 7.9% 10.9% 7.7% 7.3%
Office 7.5% 5.3% 7.4% 4.9% (2.5)%
DMO 3.5% (6.2)% 3.0% (7.7)% (3.6)%
SOHO 33.6% (47.6)% 33.6% (48.4)% (48.9)%
Other (17.8)% (8.0)% (16.5)% (4.2)% 10.5%
Total 6.2% 2.2% 6.2% 2.2% 0.7%