Global tech giant Xerox booked a charge of $US30 million in first quarter results as an ‘estimated adjustment’ from Fuji Xerox New Zealand, where an investigation is underway into leasing transactions.
Xerox also warned of additional adjustments in the future and said: We can provide no assurances relative to the outcome of any governmental investigations or any consequences thereof.
“I am pleased with our operational results in the first quarter,” Xerox CEO Jeff Jacobson told investors. “Revenue and cash flow were in-line with expectations and, despite currency headwinds, operating margin expanded driven by productivity savings from our Strategic Transformation initiatives.”
Sales were down 6.2% at $US2.45 billion. Xerox generated cash flow of $US190 million during the first quarter and ended the period with a cash balance of $US1.05 billion. The company returned $US87 million in dividends and repaid $US1.3 billion of debt.
In a statement about the investigation of Fuji Xerox New Zealand - where Fujifilm is investigating accounting practices that have led to an estimated loss of $A262 million - US-based Xerox said:
Fuji Xerox Co. is a joint venture between Xerox Corporation and Fujifilm Holdings Corporation in which Xerox holds a 25% equity interest and Fujifilm holds the remaining equity interest.
On April 20, 2017, Fujifilm announced it is conducting a review of the accounting at Fuji Xerox’s New Zealand subsidiary related to the recovery of receivables associated with certain leasing transactions that occurred in, or prior to, Fuji Xerox’s fiscal year ending March 31, 2016. The Fujifilm review is ongoing and a charge of approximately $30 million in the first quarter of 2017 represents Xerox’s share of the current Fujifilm estimated adjustments from this review.
Fujifilm has publicly stated that it expects the investigation will be completed in May 2017, and that it intends to disclose the results shortly thereafter. Given our status as a minority investor, we have limited contractual and other rights to information and rely on Fuji Xerox and Fujifilm to provide information to us and are not involved in the investigation, including its scope and timing of completion.
Although we have no reason not to rely on Fujifilm’s estimated adjustment and we are not aware of any additional amounts related to this matter that would have a material effect on our financial statements, this investigation is ongoing and our future results may include additional adjustments that are materially different from the amount of the charge that we have already recognized in connection with this matter and the period(s) to which the charge relates, and we can provide no assurances relative to the outcome of any governmental investigations or any consequences thereof.
New Zealand’s Serious Fraud Office, which in December 2016 ruled out taking action against Fuji Xerox NZ, says it will consider any new information in the case.