STAMFORD, Conn. — Xerox Corp., the world's biggest copier-maker, inflated revenue by $1.9 billion over the past five years by misreporting the timing and makeup of equipment sales. The company's stock and bonds plunged.
Xerox said in a statement that it plans to file its 2001 annual report today, which includes a restatement of $6.4 billion in sales from 1997 to 2001.
Revenue during the period will be reduced by 2 percent and pretax income by $368 million. The U.S. Securities and Exchange Commission fined the company a record $10 million in April because of the false reporting of about $3 billion in sales. The Wall Street Journal reported earlier today that Xerox may have improperly recorded revenue of as much as $6 billion.
"Prior management was obviously bending the accounting rules, but they were not fabricating revenue," said Brian Eisenbarth, who holds 700,000 Xerox shares at Davidson Investment Advisors. "It's a timing adjustment."
Shares of Xerox fell $1.10, or 14 percent, to $6.90 in late morning trading.
"Coming two days after WorldCom, this has hit a nerve," said Helen Rodriguez, head of European high-yield research at Deutsche Bank AG.
The SEC in April charged that Xerox prematurely recorded $3 billion in revenue and $1.5 billion in pretax earnings from equipment leases in Europe, Latin America and Canada. The size of the penalty, the largest against a public company for financial fraud, reflected the magnitude of deception, the agency said.
The company, which didn't admit or deny wrongdoing, agreed to restate results and ordered a fresh audit. The new errors discovered in the most recent audit center on accounting issues at Xerox's Brazil unit, the Wall Street Journal said.
The issue is "timing and allocation" of revenue only, spokeswoman Christa Carone said in a telephone interview. "There is no fraudulent revenue and there is no phony revenue and no fictional transactions."
Xerox had sales of $92.4 billion from 1997 through 2001.
Jose Manuel Santos, the treasurer at Xerox's Brazil unit in Rio de Janeiro, couldn't be reached to comment.
Regulators have stepped up scrutiny of corporate accounting since Enron Corp. filed for bankruptcy in December after overstating income by about $1 billion over four years. The accusation by the SEC Wednesday that WorldCom Inc., the No. 2 U.S. long-distance telephone company, committed fraud by hiding $3.9 billion in costs is producing more pressure from investors.
Xerox also has been contending with declining sales and profit because of competition, management changes and soaring borrowing costs. The restatements won't affect cash received or due from the leases, the company has said.