Xerox Corp., the world’s largest maker of high-speed color printers, said it received preliminary court approval to settle an eight-year-old investor lawsuit for $670 million.
Xerox will take a $491 million first-quarter charge to cover the settlement and other cases, the Norwalk, Connecticut-based company said today in a statement. Xerox will pay the settlement into a fund in five installments this year and co-defendant KPMG LLP, Xerox’s former auditor, will pay an additional $80 million.
The case, filed in 2000 and handled in U.S. District Court in New Haven, Connecticut, claimed that Xerox misled investors about its financial health. The dispute concerns common stock and bonds bought from Feb. 17, 1998, to June 27, 2002. Within that period, the stock closed as high as $63.69 in May 1999 and as low as $4.43 in December 2000 on a split-adjusted basis.
“The settlement amounts are in line with expectations and easily absorbed by Xerox’s cash flow,” Shannon Cross, an analyst with Cross Research in Livingston, New Jersey, wrote in a note today. She has a “buy” rating on Xerox.
The U.S. Securities and Exchange Commission levied a $10 million fine against Xerox in 2002, saying executives led a four- year scheme to inflate revenue to meet analysts’ growth estimates. The company restated results for 1997 to 2000 as a result of the probe.
“This was a long and difficult case and there were numerous attempts to settle, so we’re very pleased with this significant amount,” said Glen DeValerio, an attorney with Berman DeValerio in Boston, who represented the investors.
Xerox admitted no wrongdoing as part of the settlement and plans to continue its dividend payments, which it reinstated for the first time in six years in November, and its stock buyback program. The company has repurchased 22 million shares this year and has authorization to buy $1 billion more.
Xerox rose 13 cents to $14.97 at 4 p.m. in New York Stock Exchange composite trading. The stock lost 7.5 percent this year.
Standard & Poor’s placed Xerox’s BBB- rating under credit watch with positive implications, saying the settlement removes a “material financial uncertainty.” Fitch’s maintained its BBB rating and stable outlook.
