DocuTech equipment placements grew 4 percent in the quarter. Office color printing installs grew 6 percent. A 22 percent decline in production color equipment placements. STAMFORD, Conn.--April 24, 2002--Xerox Corporation reported today on first-quarter performance that reflects continued improvements in the company's operations. The company cannot provide at this time the full detail on its first-quarter results primarily due to the application of a new bundled lease accounting methodology that will be used to restate the years 1997-2000, adjust 2001 results and report final first-quarter 2002 results. This change in methodology is part of Xerox's previously announced settlement agreement with the Securities and Exchange Commission. However, Xerox is reporting today certain other metrics that will not be impacted by these changes and that represent the company's continued progress in strengthening its financial position and core operations. "During a quarter when Xerox was faced with tough issues and a continuing weakened economy, we remained focused on building back value by improving the core business and investing in future growth. Our strong performance reflects the determination of Xerox people worldwide to restore Xerox to good health," said Anne M. Mulcahy, Xerox chairman and chief executive officer. "I am encouraged by our first-quarter progress and believe that we have clearly set the stage for a return to full-year operational profitability." Xerox had about $4.7 billion in worldwide cash at the end of March following the repayment of $550 million of first-quarter maturing debt. The company's cash balance in the first quarter increased by approximately $700 million from last quarter. Cash generated from operations due to working capital and other improvements was about $320 million, prior to a $350 million tax payment resulting from the gain on last year's sale of half of the company's interest in Fuji Xerox. Debt net of cash was $12.3 billion, a 17-percent reduction from the first quarter of 2001. "Our relentless drive to fortify Xerox's financial position accelerated in the first quarter as we closed on key finance-receivable securitizations and made substantial progress in our negotiations to refinance a portion of the company's revolver and to extend its maturity," added Mulcahy. In related news, the company announced today that Xerox Capital Services, its joint venture with GE Capital Vendor Financial Services, is expected to close and become operational on May 1. XCS will manage Xerox's customer administration and leasing activities in the U.S., including various financing programs, credit approval, order processing, billing and collections. Xerox and GE Capital have also agreed to extend their U.S. finance-receivable monetization arrangement. This agreement will provide Xerox with additional funding, expected to be approximately $1 billion this year secured by portions of Xerox's lease receivables in the U.S., while the two companies finalize the agreement for GE Capital to become the primary provider of equipment financing for Xerox customers in the U.S. The company's intense focus on managing inventory resulted in a $490 million or 28 percent decrease from first-quarter 2001, including an approximately $60 million reduction from last quarter. Xerox also continued to reduce its cost base in the first quarter by taking actions that will result in additional annualized savings in excess of $100 million. Worldwide employment declined 4,300 in the first quarter to 74,600. Research and development spending of $230 million in the company's core business areas was essentially flat from first-quarter 2001. In North America and Europe, Xerox delivered year-over-year improvement in key segments of its core business. DocuTech equipment placements grew 4 percent in the quarter. Office color printing installs grew 6 percent driven by the success of the company's Phaser 860 and 7700. The weakened economy continued to delay capital spending that, along with competition, resulted in a 22 percent decline in production color equipment placements. Activity declines in the company's developing markets will continue for the near term as the company restructures the business to capture profitable growth opportunities versus sales that weaken the bottom line. However, for the first quarter, this strategy along with cost reductions led to continued improvements in the company's developing markets operations. Commenting on future activity in the company's core production, office and services business, Mulcahy cited Xerox's initiatives to strengthen its competitive position through five new product platform launches this year supported by aggressive marketing and expanded sales coverage. "These investments are designed to achieve one objective: drive future, sustainable, profitable growth," she said. Xerox began reservation order taking two weeks ago on one of the first of its new product platforms, the DocuColor iGen3. The company has since received 100 reservation orders for this breakthrough digital color production press, which has list prices starting at $510,000 and is scheduled to begin shipping later this year. Xerox also recently marked the 5,000th installation of its DocuColor 2000 Series of digital color presses, the most successful product of its kind with one-and-a-half times more placements than all comparable competitors combined.