Toshiba issues a profit warning after Q3 sales fell and the COO resigns due to cost concerns.

TOKYO, April 16 (Reuters) -Japan’s Toshiba (OTC: TOSYY) Corp. cut its annual earnings estimate after its third-quarter profit fell and its chief operating officer quit over improper use of entertainment expenses from a few years ago.

Toshiba’s quarterly operating profit fell 88% to $40.4 million, which is much less than the Refinitiv consensus estimate of 37 billion yen. This is because less money was spent on data, which hurt the demand for hard disc drives.

The industrial conglomerate also had to pay a big fee for an old project related to its business in power generation systems.

The amount of money it thought it would make in the year ending in March was cut by a quarter, to 95 billion yen.

Toshiba said that COO Goro Yanase quit because he used his entertainment expenses in 2019 in a way that wasn’t right when he was an executive at a company unit.

In the statement about his leaving, it did not say who would take his place.

Yanase’s poor performance and departure come at a time when the scandal-plagued industrial conglomerate is looking at a binding buyout offer from a group led by private equity firm Japan Industrial Partners (JIP).

The consortium sent in its formal proposal last week. Sources said that the investors had secured 1.4 trillion yen ($10.6 billion) in loan commitments for their buyout, including a commitment line of 200 billion yen for working capital.

The final buyout offer would also include a stake in the company worth about 1 trillion yen, sources said, adding that many details of the possible deal still need to be worked out.

If the buyout goes through, it would end years of drama for the industrial conglomerate, including accounting scandals, heavy losses, concerns about corporate governance, and conflicts with activist investors that led to a strategic review.

($1 = 131.8800 yen)