STAMFORD, Conn.--April 21, 2005-- Xerox Corporation announced today first-quarter earnings that reflect increased sales of its digital color systems, growth in document services and strong operational performance. Earnings per share from continuing operations increased 18 percent compared to first quarter of last year. The company reported first-quarter 2005 earnings per share of 20 cents including a 6-cent gain from the previously announced sale of Xerox's equity interest in Integic Corp., which was offset by restructuring charges of 6 cents per share. "Our profit performance in the first quarter met the high range of our expectations through increased gross margins and operational improvements that help ensure Xerox is cost-competitive in every area of our business," said Anne M. Mulcahy, Xerox chairman and chief executive officer. "Xerox's industry-leading color technology and expertise in document-related consulting services continued to be the key drivers of the company's growth initiatives," she added. "Despite a quarter when market conditions slowed overall equipment sales, we grew color revenue by 15 percent and delivered another quarter of double-digit revenue from Xerox Global Services." First-quarter equipment sales were flat year over year, and total revenue of $3.8 billion declined 1 percent. Both equipment sales and total revenue included a currency benefit of 2 percentage points. Revenue growth continued to be impacted by post-sale revenue declines from the company's older light-lens technology. Weak performance in Brazil also impacted post-sale and total revenue in the first quarter, although trends are improving in this operation. Revenue from the company's value-added service offerings grew 23 percent in the first quarter as demand increased for consulting, imaging and content management from Xerox Global Services, which provides customers with practical solutions to reduce document costs and simplify work processes. Xerox's production business provides commercial printers and document-intensive industries with high-speed digital technology that enables on-demand, personalized printing. Production equipment sales grew 2 percent with total production revenue down 2 percent due to a decline in post-sale revenue from older light-lens products as well as declines in production publishing. First-quarter install activity for production monochrome systems declined 9 percent while production color installs grew 18 percent, largely due to strong placements of the Xerox DocuColor 5252 and 8000 series as well as the Xerox iGen3 Digital Production Press. In March, Xerox launched a faster version of the company's flagship iGen3, which now prints 10 percent to 20 percent faster at speeds up to 120 pages per minute. Next month Xerox will add to its portfolio of production systems, software and solutions, continuing to strengthen its leadership position in this market. In Xerox's office business, which provides technology and services for workgroups of any size, equipment sales were flat year over year and total revenue declined 2 percent. Equipment sale revenue was impacted by product mix with the company selling a greater proportion of lower-priced monochrome desktop units compared to the first quarter of last year. Installs of digital office monochrome systems were up 17 percent reflecting increased placements of Xerox WorkCentre desktop multifunction products. In office color, activity was strong with installs of office color multifunction systems up 21 percent and office color printing installs up 180 percent. Late last month, Xerox announced the WorkCentre C2424 office color multifunction system. The industry's first solid ink device that prints, scans and copies, the WorkCentre C2424 is 30 percent to 60 percent more affordable and has color speeds twice as fast as leading comparable products in its class. Additional enhancements to Xerox's office systems and services will be announced in late June. Xerox increased its advertising in the first quarter through its "Xerox Color: It Makes Business Sense" campaign that highlights the value of the company's color technology. At the same time, Xerox maintained its sharp focus on costs and operational performance. As a result, selling, administrative and general expenses decreased year over year by $27 million. First-quarter gross margins were up nearly 1 percent to 40.7 percent. The company generated operating cash flow of $337 million in the first quarter and closed the quarter with $3.3 billion in cash. Debt was down close to $1 billion year over year. For the second quarter of 2005, Mulcahy said she expects earnings in the range of 21-24 cents per share.