- The Washington Times - Saturday, June 29, 2002

STAMFORD, Conn. (AP) Xerox Corp. announced yesterday that it had overstated revenue by billions of dollars over the past five years, including $1.9 billion that should properly be recorded in the future.
The news comes in the wake of a series of recent reports of corporate-accounting irregularities and sent Xerox shares sharply lower. Xerox fell $1.03 to $6.97 in trading on the New York Stock Exchange.
The restatement was required under a settlement Xerox reached with the Securities and Exchange Commission. The SEC said in April that accounting improprieties increased the copier company's pretax profits by $1.5 billion from 1997 through 2000.
Without admitting or denying wrongdoing, Xerox settled with the SEC by paying a $10 million civil penalty, the largest levied against a company for financial-reporting violations.
The adjustments announced yesterday cover an additional year beyond those examined before the SEC settlement and reduce revenue and pretax income for 1997, 1998 and 1999 while increasing revenue and pretax income for 2000 and 2001.
Xerox said it would file a statement reflecting the restatement for 1997-2000 and adjustments to 2001.
"Xerox today closes a difficult chapter in the company's history. And, we are firm in our resolve to ensure the highest integrity of the company's financial reporting," said Anne M. Mulcahy, Xerox chairman and chief executive officer.
Xerox said total, pretax income over a five-year period declined by $1.4 billion from previously reported amounts.
About $1.9 billion of revenue that was recognized over past years has been reversed and will be recognized in the company's future results, beginning this year. Revenue for 1997-2001 has been reduced by 2 percent to $91 billion.
For 1997 through 2001, the company reversed $6.4 billion of previously recorded equipment-sale revenue. That figure was offset by $5.1 billion of revenue that has been recognized and reported during the same period as service, rental, document outsourcing and financing revenue.
Another $600 million involved revenue from leases that pre-dated 1997 but had been improperly included in 1997-2001 reports.
The equipment-sale revenue restatement was much larger than expected at the time of the SEC settlement. Xerox said the increase was primarily due to a change in the company's lease accounting in Latin America from equipment sales to rental.
An SEC spokesman declined to comment yesterday.
Xerox said the restatement has no impact on a newly-negotiated revolving line of credit it reached with lenders last week. The company is scheduled to report its second-quarter earnings on July 25.

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