Earnings Reports for July 26

Xerox Corp. reported a drop in second-quarter earnings, citing a charge for accounting irregularities in its Mexico subsidiary and a decline in revenues for certain products.

The company reported net income of $145 million, or 19 cents per share, compared with $448 million, or 62 cents per share in the same period a year ago. That includes a charge of $78 million, or 11 cents per share, to cover problems associated with its Mexican operation.

Without the special charge, Xerox had earnings of 30 cents per share, which matched the estimate by a consensus of analysts surveyed by First Call/Thomson Financial.

Xerox had warned last month that it expected a charge of about 6 cents per share for the Mexican problems.

Chief Executive Paul Allaire said the accounting irregularities, which are being investigated by the Securities & Exchange Commission, appear to have been caused by several senior managers in Mexico who collaborated to circumvent Xerox accounting policies and administrative procedures. Allaire said their actions resulted in the charge, which is primarily for bad debt and unrecorded liabilities.

“We have no reason to believe that the special circumstances that existed in Mexico are replicated in any other country,” Allaire said.

Second-quarter revenue was $4.69 billion, 4 percent lower than the same period a year ago. Pre-currency revenue declined 1 percent. Currency adversely impacted earnings by approximately 4 cents during the quarter.

The company said a revenue decline in high-speed black-and-white production printing and publishing products created the most significant effect on income.

Xerox said a realignment of its sales force also continued to adversely affect revenues.

The company said there were some improvements during the quarter, including Brazil’s continued strong recovery and a 50 percent increase in Fuji Xerox’s net income.

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The Associated Press and Reuters contributed to this report.

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