July 24, 2015 / 11:48 AM / in 2 years

Restructuring charges mostly wipe out Xerox's second-quarter profit

Ursula Burns, CEO of Xerox in Jouy-en-Josas, near Paris, August 28, 2014. REUTERS/Benoit Tessier

(Reuters) - Xerox Corp (XRX.N) barely managed to eke out a profit in the second quarter after the printer and copier maker took a charge related to a revamp of its business that provides administrative and care-management services to government healthcare programs.

Xerox, whose shares were down 0.7 percent in premarket trading, said last week it would record a charge of about $145 million as it restructures the business.

Norwalk, Connecticut-based Xerox does not disclose profit figures for its healthcare business, but analysts have said it is still unprofitable.

Cross Research analyst Shannon Cross said the restructuring was aimed at making the business profitable over the longer term by reducing start-up costs.

The business currently contributes “$2 billion plus” to total revenue, a company spokeswoman said last week.

Xerox, like rival printer/copier makers Lexmark International Inc LXK.N and Hewlett-Packard Co (HPQ.N), is shifting its focus to high-value software and service businesses as corporate customers reduce printing to cut costs and consumers shift to mobile devices.

“Xerox for me is a work in progress because they are fixing their services business while continuing to garner significant amount of cash out of the printing business,” Cross said.

Xerox has also been expanding geographically through acquisitions and has been streamlining its operations by disposing of non-core assets.

The company bought cloud platform provider Healthy Communities Institute during the quarter to boost its healthcare business.

The company said on Friday it would increase share repurchases by $300 million to $1.3 billion and reduce spending on acquisitions.

Including the charges, Xerox’s net income attributable to the company fell to $12 million, or 1 cent per share, in the three-months ended June 30 from $266 million, or 22 cents per share, a year earlier.

Xerox said it expected earnings of 17-19 cents per share and an adjusted profit of 22-24 cents per share in the current quarter. Analysts on average expect a profit of 25 cents per share, according to Thomson Reuters I/B/E/S.

Overall net restructuring and asset impairment charges totaled $157 million in the latest quarter.

Excluding items, net income from continuing operations attributable to Xerox was 22 cents per share, in line with the average analyst estimate.

Xerox said it expected to incur additional restructuring charges of about 1 cent per share in the current quarter.

The strong dollar had a 4 percentage point negative impact on total revenue, which fell 7 percent to $4.59 billion, Xerox said. Analysts had expected revenue of $4.64 billion.

Reporting by Devika Krishna Kumar in Bengaluru; Editing by Saumyadeb Chakrabarty and Ted Kerr

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