Net Income Tumbles 44% in 2nd Quarter at Xerox

Xerox Corp.’s net income tumbled 44% in the second quarter, the company said, but added that its income from continuing operations grew 13% because of sharply higher profits from financial services.

The strong results from financial services, led by Crum & Forster, the company’s property and casualty insurance subsidiary, offset weakness in office equipment caused by weak capital spending, said David Kearns, Xerox’s chairman and chief executive.

Kearns said the results reinforced the copier maker’s strategy of diversifying into financial services, a tactic that was criticized by some analysts when losses at Crum & Forster were dragging down the company’s profits.

Net income in the second quarter was $122 million, compared to $220 million a year earlier, Xerox said.

However, those results were distorted by a one-time charge of $12 million in the 1986 quarter related to the pending sale of Century Data Systems and $100 million in income from discontinued operations in the 1985 quarter, including a $95-million one-time gain that included profits from the sale of three publishing companies.

The 1986 quarter also included a $15-million one-time gain from a tax settlement.

Xerox said income from continuing operations grew to $135 million from $120 million in the same period of 1985.

Financial services contributed $62 million to net income in the second quarter, a 229% increase from $19 million a year earlier, Xerox said. Crum & Forster’s results were helped by higher premiums, tighter underwriting and better investment income, the company said.

Revenue from continuing operations of the copier and information systems business rose 8% in the quarter to $2.3 billion from $2.12 billion. Revenue from financial services, which is not consolidated in Xerox’s results, rose 17% to $855 million from $728 million.