Financial Statement Audit

RNS Number:5144E
Xerox Corp
31 May 2001

For Additional Information contact:


Leslie F. Varon
Director, Investor Relations
203-968-3110
[e-mail]

Timothy J. Fogal                                  800 Long Ridge Road
Manager, Investor Relations                       Stamford, Connecticut 06904
203-968-3189                                      Fax [phone]
[e-mail]                       www.xerox.com/investor

 

XEROX FINANCIAL STATEMENT AUDIT COMPLETE

"After rigorous reviews of Xerox's accounting, no fictitious transactions were
found and the company's liquidity is not impacted."

STAMFORD, Conn., May 31, 2001 - Xerox Corporation (NYSE: XRX) today announced
that its auditors, KPMG LLP, have certified Xerox's financial statements for the
three years ended Dec, 31, 2000.

The financials include restatements reflecting results of the previously
announced fuller review by KPMG and the concurrent investigation conducted by
the Audit Committee of the Xerox board of directors.

Xerox has now determined that certain accounting practices including some that
involve complex accounting issues, which it had previously believed to comply
with generally accepted accounting principles (GAAP), in fact, misapplied GAAP. 
In addition, the company has made period adjustments to certain previously
recorded charges for errors and irregularities resulting from the accounting
issues in Mexico. The impact is a cumulative reduction of Common Shareholders
Equity and Consolidated Tangible Net Worth of $137 million and $76 million,
respectively, as of Dec. 31, 2000. Adjustments to revenue in each of the three
years, 1998-2000, were insignificant. Net income for 2000 increased by $127
million. First quarter 2001 net income improves by approximately $50 million,
but this level of adjustment will not continue in subsequent 2001 quarters.

"After rigorous reviews of Xerox's accounting, no fictitious transactions were
found and the company's liquidity is not impacted," said Paul A. Allaire, Xerox
chairman and chief executive officer. "Xerox can now continue to focus on
effectively executing its turnaround strategy, which remains on track."

Allaire added that Xerox continues to make progress in improving its already
substantial cash position. The company's current worldwide cash balance is
approximately $2 billion, following the repayment of most of its second quarter
maturing debt.

Xerox today is filing an 8-K with the Securities and Exchange Commission that
includes its audited financial statements. Details of the components of the
adjustments as well as additional financial disclosures are included in the 8-K.
The complete Annual Report on Form 10-K for 2000 will be filed very shortly.

This release contains forward-looking statements and information relating to
Xerox that are based on our beliefs as well as assumptions made by and
information currently available to us. The words "anticipate," "believe,"
"estimate," "intend," "will" and similar expressions, as they relate to us, are
intended to identify forward-looking statements. Actual results could differ
materially from those projected in such forward-looking statements. Information
concerning certain factors that could cause actual results to differ materially
is included in the company's most recent 8-K filed with the SEC.

XEROX(R), The Document Company(R) and the digital X(R) are trademarks of XEROX
CORPORATION. For more information on Xerox, visit www.xerox.com/investor.