STAMFORD, Conn.--Oct. 23, 2001--Xerox Corporation today announced a third-quarter loss of 24 cents per share, excluding restructuring charges of 5 cents per share. The loss includes 5 cents from unhedged currency exposure, 3 cents from an adjustment to the underlying tax rate on the 2001 first-half loss, and 1 cent from a $10 million property insurance loss related to the Sept. 11 tragedy. As previously reported, Xerox's liquidity position continued to improve. The company had $2.4 billion in cash as of Sept. 30 compared to $2.2 billion at the end of June. Xerox's net debt is down $3.4 billion since the end of September 2000, a 20 percent reduction. The company said that it has recently initiated discussions with its agent banks to refinance a portion of its $7 billion revolving line of credit and extend its maturity from October 2002. Third-quarter revenue was $3.9 billion, 13 percent lower than the third quarter of last year. Pre-currency revenue declined 12 percent. "Xerox was prepared for significant challenges in the third quarter due to weakened economies. Despite expected revenue declines, our results in July and August exceeded expectations, evidence of our much improved operations,'' said Anne M. Mulcahy, Xerox president and chief executive officer. "However, the dramatic economic downturn since the events of Sept. 11 resulted in an unprecedented loss in September, driven by disproportionate revenue decreases during the last two weeks of the month.'' While revenue in North America and Europe declined, both regions showed significant year-over-year bottom-line improvement led by increased profitability in North America. Revenue in the company's developing markets was down 34 percent, reflecting weakened economies and reduced equipment placements in Latin America as the company reconfigures these operations to maximize liquidity versus gaining market share. Gross margins increased from the third quarter of last year to 36.2 percent, and represent the first year-over-year margin improvement since Xerox launched its turnaround program in the fourth quarter of 2000. In October of last year, Xerox announced plans to reduce $1 billion in costs by the close of 2001. Today the company reported that it has implemented actions that will achieve the entire $1 billion target, including the reduction of close to 11,000 positions worldwide through the combination of early retirement and voluntary leave programs, attrition and layoffs. "In the past 12 months, Xerox has implemented a strategy to restore the company's financial strength by generating cash, reducing debt and cutting costs -- all while investing in the future through research and development,'' added Mulcahy. "While our progress to date has been significant, we will intensify our cost-reduction activities to help lessen the impact from heightened economic concerns.'' Commenting on expectations for the fourth quarter, Mulcahy said, "We remain cautiously optimistic that the benefits from our turnaround program will position the company for a return to operational profitability. However, the uncertainty in the marketplace presents significant challenges and will lessen the sequential increase in fourth-quarter revenue.'' Xerox also reiterated that it remains in full compliance with its debt covenants and estimates that its consolidated tangible net worth cushion is approximately $175 million.