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Second-Quarter 2008
Earnings Presentation
Anne MulcahyChairman & CEO
Ursula BurnsPresident
Larry ZimmermanExecutive Vice President & CFO July 24, 2008
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Anne Mulcahy
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Earnings of $0.24 per share Includes $0.05 restructuring charge, within guidance of $0.23* to $0.25*
Total revenue up 8%, 4% CC1
Post-sale up 10%, 6%CC1
Color up 11%, Services annuity up 8%
Global Imaging Systems and Developing Markets deliver consistent, strong growth
Cost and expense management
Gross margin 39.2%
SAG percent of revenue 25.8%
Balance sheet and cash flow performance
$442M cash from operationsDelivering shareholder value
$377M in share repurchases
Additional $1B authorized with available authorization at $1.7B
* Includes $0.05 restructuring charge1 Constant currency (CC): see slide 17 for explanation of non-GAAP measures
Second-Quarter Overview
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2007 2008
Q2 Q2 Adjusted1
$ 4,533
5%1%
8%4%
(2%)(5%)
8%4%
$ 3,373
10%6%
$ 1,160
2%(2%)
$ 4,208
6%4%
$ 3,067
7%5%
$ 1,141
3%1%
Adjusted1
1%(1%)
4%2%
(4%)(6%)
(in millions)
Total Revenue
GrowthCC* Growth
Post Sale
GrowthCC* Growth
Equipment
GrowthCC* Growth
*Constant currency: see slide 17 for explanation of non-GAAP measures1Adjusted Q2 2007 & 2008: The percentage point impacts reflect the revenue growth YOY after includingGIS results from second quarter 2006 & 2007. See slide 17 for explanation of non-GAAP measures
Revenue
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Total Color Revenue Color Trends
$1,022
Q2 2007
$1,192
Q2 2008
28% page volume growth continues to fuel post-sale revenue growth
Color 40% of total revenue, 16% of total pages
Equipment revenue impacted by production color
Total Revenue 11%(+5% @ CC)
Q22006
Q22007
Q22008
Color Revenue:% of Post Sale 31% 34% 37%
% of Equipment 44% 48% 50%% of Total Revenue 34% 38% 40%
Color Pages:Growth 40% 30% 28%
% of Total Pages 9% 12% 16%
$509 $508
Post Sale 17%(+11% @ CC)
Equipment Flat(-6% @ CC)
$1,531M $1,700M
Constant currency: see slide 17 for explanation of non-GAAP measuressColor revenue excludes GIS resultsColor pages exclude GIS, DMO and printers
Color Performance
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Production Revenue
Q2 2008 YTD
Production Monochrome (8%) (1%)
Production Color (12%) (3%)
Install Growth1
$939
Q2 2007 Q2 2008
$1,020
Total Revenue 4%(-1% @ CC)
$342 $317
Post Sale 9%(+4% @ CC)
Equipment (7%)(-13% @ CC)
$1,281M $1,337MProduction Overview
Constant currency: see slide 17 for explanation of non-GAAP measuress
DMO results are included in the results of the Production, Office and Other segments1Install growth includes Xerox-branded product shipments to GIS
Production Segment
Positive post-sale trend offsetting equipmentdeclines
Developing Markets equipment revenue up15%; total revenue up 20%
Color activity impacted by U.S. economy andtiming of product launches
New offerings showcased at drupa to providemomentum in 2H 08
Xerox iGen4 Press
Xerox 700 digital color press
Xerox DocuColor 5000AP digital press
Color continuous feed
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Office Revenue
Q2 2007 Q2 2008
$1,589 $1,751
$738 $775
Office B&W Copiers/MFDs 10% 22%
Segments 1-2 (11-30) ppm 11%
8%
34%
12%
Segments 3-5 (31-90) ppm2
26%
11%
37%Office Color MFDs
Color Printers 23%
Post Sale 10%(+6% @ CC)
Equipment 5%(+1% @ CC)
$2,327M $2,526M
Office Overview
Total Revenue 9%(+5% @ CC)
Constant currency: see slide 17 for explanation of non-GAAP measuressDMO results are included in the results of the Production, Office and Other segments1Install growth includes Xerox-branded product shipments to GIS2Segments 3-5 (31-90) ppm includes 95 ppm, segment 6 device with an embedded controller
Q2 2008 YTD
Install Growth1
Global Imaging delivers strong results
Developing Markets equipment revenue
up 16%; total revenue up 14%
SMB portfolio strengthened with Q2launches; more to come
Continue to deliver solid color growth
Expanded distribution through VeenmanB.V. and Saxon Business Systems
acquisitions GIS added third YTD acquisition last
week
Office Segment
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DMO Revenue
Q2 2007 Q2 2008
$366$437
Total Revenue 19%
$165 $194
Post Sale 19%
Equipment 18%
$531M $631M
DMO Overview
Developing Markets Operations
Beginning in 2008, DMO results are not reported as a separate segment, but are included within the resultsof the Production, Office and Other segments
Positive performance across all regions
Post-sale growth driven by supplies and
managed services
Continued equipment revenue growthin both office and production
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Larry Zimmerman
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(in millions, except per share data) Q2 2008 Q2 2007$ 4,533 $ 4,208
40.3%
$ 2235.3%
$ 1,081
25.7%
$ 78
$ (2)
$ 266
$ 2724%
$ 0.28
39.2%
Modest growth driven by post-sale
Margin decline driven by product andchannel mix as well as price
R,D&E $ 223R,D&E % of Revenue 4.9%
Restructuring $ 63 $0.05 per share cost focus
Productivity drives improved expense torevenue
SAG $ 1,170 GIS, currency and continued coverageinvestments
Including $63M restructuring charge
Tax Rate 24% 26%2, excluding restructuring
25.8%
$ 78
$ 215
$ 29
$ 0.241
Revenue
Gross Margin
SAG % of Revenue
Other, Net
Net Income
Equity Income
Diluted EPS
1 Includes $0.05 restructuring charge2Adjusted tax rate : see slide 17 for explanation of non-GAAP measures
Earnings
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2008 YTD
Post Sale Leading Indicators
Digital Revenue 8%
Digital MIF 6%
Digital Pages1 1%
B&W Digital Rev 2%
B&W Digital MIF flat
B&W Digital Pages1 5%
Color Revenue 16%
Color MIF 37%
Color Pages1 29%
MIF (Machines in Field) & page data exclude printers, DMO & GIS. All revenue measures exclude GIS*Services annuity includes managed services and value-added services1 2008 YOY growth is based on updated methodology, applies to US pages
FY 2005 FY 2006 FY 2007 YTD 2008
Color % Revenue 27% 31% 35%
17%
12%
8%
2%
37%
Color % of MIF 10% 13% 21%
Color % of Pages 7% 9% 16%
Services* Annuity Growth 1% 6% 8%
Light Lens % of Revenue 5% 3% 1%
Annuity Scorecard
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Anne Mulcahy
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Summary
Annuity-based model drives revenue growth and cash generation Color, Services, 23 new products to accelerate activity
Global and market diversification offset U.S. economy pressure
Expanded coverage, more products fuel SMB growth
Restructuring drives improvements balance of year
Continued share repurchase
$711M year-to-date
Program-to-date: repurchased $2.8B, 186 million shares
Additional $1B authorized with $1.7B available
Maintain $1.26* $1.30* full year expectations
Q3 EPS $0.28 - $0.30
* Adjusted diluted EPS: see slide 17 for explanation of non-GAAP measures
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Appendix
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19 *See slide 17 for explanation of non-GAAP measure
Revenue As Adjusted adds GIS estimated results for the period from May 9th throughJune 30th 2006 to our 2006 reported revenue
Q2 2007 Non-GAAP Reconciliation
(in millions)
2007 2006 % Change Currency
Equipment Sales Revenue:
As Reported 1,141$ 1,109$ 3% 2% 1%
As Adjusted 1,141$ 1,194$ (4%) 2% (6%)
Post Sale Revenue
As Reported 3,067$ 2,868$ 7% 2% 5%
As Adjusted 3,067$ 2,957$ 4% 2% 2%
Total Revenues:
As Reported 4,208$ 3,977$ 6% 2% 4%
As Adjusted 4,208$ 4,151$ 1% 2% (1%)
Three Months EndedJune 30,
% Change atConstantCurrency*
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Q2 2008 Adjusted Effective Tax Rate Reconciliation
(in millions) As Reported Restructuring As Adjusted
Income (Loss) before Income Taxes and Equity Income 245$ 63$ 308$
Income Taxes 59$ 20$ 79$
Effective Tax Rate 24% 26%
Three Months Ended
June 30, 2008
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Earnings Expectations
Q2 08
Actual
Q3 08 FY 08
Guidance
$0.24* $0.28 - $0.30 $0.72 $0.76*
Litigation $0.54
Adjusted Diluted EPS1 $0.24* $0.28 $0.30 $1.26 $1.30*
GAAP EPS
1Adjusted diluted EPS: see slide 17 for explanation of non-GAAP measures
*Includes $0.05 restructuring charge