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Xerox Corp. (BB63)

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Friday 28 June, 2002

Xerox Corp.

Xerox Expects to File Today Year 2001 10-K

Xerox Expects to File Today Year 2001 10-K
 Restatement Complete 

    LONDON--(BUSINESS WIRE)--June 28, 2002--

Xerox Corporation (NYSE: XRX) announced that it expects to file today
the company's 2001 10-K, which includes a restatement for the years
1997 through 2000 as well as adjustments to previously announced 2001
results. The restatement, required under the company's settlement
agreement announced in April with the Securities and Exchange
Commission, primarily reflects changes to the company's lease
accounting under Statement of Financial Accounting Standards No. 13.
As a result, adjustments have been made to the timing and allocation
of equipment, service, rental and finance revenue streams.
Approximately $1.9 billion of revenue that was recognized over past
years has been reversed and will be recognized in the company's future
results, beginning in 2002. The monetary value of customers' contracts
has not changed and there is no impact on the cash that has been
received or is contractually due to be received.

For 1997 through 2001, the company reversed $6.4 billion of previously
recorded equipment sale revenue offset by $5.1 billion of revenue that
has been recognized and reported during the same period as service,
rental, document outsourcing and financing revenues. Revenues for
1997-2001 have been reduced by 2 percent to $91 billion.

The reversal of equipment sale revenue was larger than initially
expected primarily due to a change in the company's lease accounting
in Latin America from equipment sales to rental.

In addition to the reallocation of revenues, the restatement includes
a $368 million reduction in pre-tax income primarily due to the timing
of the establishment and release of certain reserves, including
restructuring reserves and the timing of recognition of interest
income on tax refunds.

In total, pre-tax income over this five-year period declined by $1.4
billion from previously reported amounts. Shareholders equity was
reduced by $1.3 billion as of year-end 2001.

'Xerox today closes a difficult chapter in the company's history. With
the filing of the 2001 10-K, we will have resolved the company's
accounting issues with the SEC and completed the restatement. And, we
are firm in our resolve to ensure the highest integrity of the
company's financial reporting,' said Anne M. Mulcahy, Xerox chairman
and chief executive officer. 'At the same time, we continue to improve
our operations and bring innovative technology to market. Our new
management team has put the past behind us. We are sharply focused on
the future where we are well positioned to capture profitable growth
opportunities, creating greater value for our customers and
shareholders.'

Overall, the total adjustments in the restatement reduce full-year
revenues and pre-tax income for 1997, 1998 and 1999 while increasing
revenues and pre-tax income for 2000 and 2001. Total revenue on a
restated basis for 2001 was $17 billion and the net loss was $71
million or 12 cents per share.

The company noted that the restatement has no impact on the new credit
facility announced last week with the exception of an update to the
financial covenants reflecting the final restated numbers.

Xerox also confirmed that it expects to file on July 1 its
first-quarter 2002 10-Q, incorporating revisions to the preliminary
results reported on April 24. The company is scheduled to report its
second-quarter 2002 earnings on July 25.

For additional information about The Document Company Xerox, please
visit our Worldwide Web site at www.xerox.com/investor.

This release contains forward-looking statements and information
relating to Xerox that are based on our beliefs as well as assumptions
made by and information currently available to us. The words
'anticipate,' 'believe,' 'estimate,' 'expect,' 'intend,' 'will' and
similar expressions, as they relate to us, are intended to identify
forward-looking statements. Actual results could differ materially
from those projected in such forward-looking statements. Information
concerning certain factors that could cause actual results to differ
materially is included in the company's Form 10-K, which will be filed
today, June 28, 2002, with the SEC. XEROX(R), The Document Company(R)
and the digital X(R) are trademarks of XEROX CORPORATION.

   Short Name: Xerox Corp.
   Category Code: MSC
   Sequence Number: 00000362
   Time of Receipt (offset from UTC): 20020628T151405+0100

                                                                                                                                         

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