Xerox Provides Update on Government Healthcare Business Strategy

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The FINANCIAL — Xerox on October 13 provided an update regarding the strategic direction of its government healthcare business, specifically addressing the implementation of its Health Enterprise Medicaid platform in California and Montana.

“Today’s announcement builds on the change in strategy from last quarter,” said Ursula Burns, Xerox chairman and chief executive officer. “We are taking additional steps to improve our financial performance and significantly reduce the volatility of our results going forward.”

Late in the third quarter, discussions took place with clients in California and Montana regarding the status and scope of current Health Enterprise platform projects, which evolved to include options to not fully complete the projects. Based on those discussions, Xerox believes it is probable that it will not fully complete the implementation of the platform in these states. Xerox expects to continue to process Medicaid claims using the existing legacy systems, thus providing uninterrupted service for the states’ healthcare providers and constituents, according to Xerox.

Xerox remains committed to the implementation and ongoing operation of the Health Enterprise platform for its other state clients. In addition, the company will continue to provide other innovative government healthcare solutions to the 35 states and their citizens whom it serves. Xerox has a diverse portfolio of healthcare solutions and will focus on the more profitable market segments from which it derives over two thirds of its current government healthcare revenues. 

As a result of these developments, Xerox is recording a pre-tax charge of approximately $385 million (approximately $240 million after-tax or 22 cents per share) in its third-quarter 2015 results reflecting estimated settlement costs and other impacts from these changes. The charge reflects approximately $130 million for the write-off of receivables and other related assets as well as approximately $30 million of non-cash impairment charges, with the remainder of the charge expected to be cash outflows in future quarters.  

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Xerox now expects a third-quarter 2015 GAAP loss from continuing operations of 3 to 5 cents per share. Adjusted earnings per share, excluding this charge, is expected to be in line with our guidance of 22 to 24 cents.


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