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Xerox Reports 2000 Results, Revenue Down $1 Billion

Press release from the issuing company

STAMFORD, Conn., Jan. 29, 2001  -- Xerox Corporation (NYSE: XRX) today reported a fourth quarter loss of 31 cents per share, excluding an 18-cent gain on the sale of its China operations and additional net restructuring provisions of 6 cents. The company also said its turnaround plans, including asset sales, cost reductions and plans to exit the financing business, are on track. "Xerox strengthened its cash position in the fourth quarter and ended the year with more than $1.7 billion in cash. Operational improvements contributed to a reduction of more than $400 million in inventory in the quarter," said Paul A. Allaire, Xerox chairman and chief executive officer. "Our prime objective of cash generation is being realized." Xerox concluded 2000 by closing on the $550 million cash sale of its China operations to Fuji Xerox. Earlier this month Xerox secured $435 million in financing from GE Capital and confirmed that it is negotiating with GE Capital to provide equipment financing for Xerox customers in several European countries. In addition to asset disposition initiatives, Xerox is making significant progress with its cost-reduction activities. "We are aggressively implementing our cost-reduction plans, which will yield more than $1 billion in savings by the end of 2001," said Anne M. Mulcahy, Xerox president and chief operating officer. "Since the third quarter of 2000, we have taken actions that account for more than one-third of this target, including the reduction of approximately 2,000 jobs worldwide in the fourth quarter. This activity will intensify with the reduction of 4,000 jobs in the first quarter and additional reductions through the balance of the year." Fourth quarter revenue was $4.8 billion, 13 percent lower than the fourth quarter of 1999. Pre-currency revenue declined 9 percent. Equipment sales in the fourth quarter accelerated 24 percent from the third quarter but fell short of historical levels due to a combination of competitive pressures, unfavorable market conditions and sales productivity issues. Operating margin declined reflecting weak high-end, black-and-white equipment sales, temporary pricing actions to reduce inventory on certain products, increased provisions and unfavorable transaction currency. Color revenue grew 54 percent in the fourth quarter, including the Tektronix color printer division. Installs of the DocuColor 2000 family totaled 1,900 units for the year, exceeding original projections by more than 25 percent. Revenue from Xerox's full-line of color products represented 17 percent of fourth quarter revenues, up from 10 percent in the fourth quarter last year. Xerox also reported that its recurring document outsourcing revenues grew 20 percent for the fourth quarter. The company increased research and development spending 11 percent in the quarter largely to fuel development of solutions and production color, including its innovative "FutureColor" technology, which is scheduled for customer engagement later in the year. "In absolute terms, our fourth quarter revenue grew 7 percent from the third quarter. Many of our products and services, particularly color and outsourcing, lead the industry and our improved liquidity will over time strengthen customer confidence and provide the financial and operational stability upon which we intend to rebuild our business," said Mulcahy. Looking forward, Allaire said: "We are executing every element of our turnaround plan to yield the fundamental changes in our business that will deliver long-term benefits. We are confident in Xerox's turnaround in 2001, continuing to generate cash, and returning the company to profitability in the second half and for the full year." For the year, Xerox earned a $117 million profit, or 12 cents per share before special items. Including special items Xerox reported a 2000 loss of 63 cents per share, or $384 million. Revenues in 2000 were $18.6 billion, compared with $19.5 billion in 1999.

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