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Xerox Comments On Ratings Action by Moodys

Press release from the issuing company

STAMFORD, Conn.--May 1, 2002--Xerox Corporation's chief executive officer today commented on the ratings decision by Moody's Investor Services, calling it "inconsistent with the company's progress and momentum." "Our performance demonstrates that we have significantly improved our operations and strengthened our liquidity. We have consistently and effectively executed on every element of our turnaround plan and have clearly set the stage for a return to full-year operational profitability," said Anne Mulcahy, Xerox chairman and chief executive officer. Among the company's recent accomplishments: * Xerox Capital Services, Xerox's joint venture with GE Capital Vendor Financial Services, formally began operations today. Xerox Capital Services will manage Xerox's customer administration and leasing activities in the U.S., a key element of the company's plan to transition equipment leasing to third-party partners. * The company's worldwide cash balance increased to $4.7 billion at the end of the first quarter. Since announcing the turnaround plan in October 2000, Xerox has reduced debt net of cash by 28 percent to $12.3 billion, as of first-quarter 2002. * Xerox has taken actions to reduce annual spending by more than $1.2 billion over the past 18 months, while investments in research and development have been sustained at about 6 percent of revenue. * Xerox has announced it expects to complete negotiations no later than the end of June to refinance the $7 billion revolving line of credit. * Xerox reached a settlement with the Securities and Exchange Commission, effectively resolving all outstanding issues with the SEC. Xerox neither admitted nor denied the allegations of the SEC complaint. * The company said it expects to file its 2001 10-K and 2002 first-quarter 10-Q by the June 30 extension deadline. Mulcahy concluded, "We will continue improving the efficiencies of our operations; investing in our core production, office and services businesses to drive future profitable and sustainable revenue growth; and delivering on our commitment to build back value in the company."