FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended: December 31, 1998
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from: ______ to ______
XEROX CORPORATION
(Exact name of registrant as specified in its charter)
1-4471
(Commission file number)
New York 16-0468020
(State of incorporation) (I.R.S. Employer Identification No.)
P.O. Box 1600, Stamford, Connecticut 06904
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 968-3000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $1 par value New York Stock
Exchange
Chicago Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes: (X) No: ( )
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
( )
The aggregate market value of the voting stock of the registrant held by
non-affiliates as of February 26, 1999 was: $39,661,401,412.
(Cover Page Continued)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Class Outstanding at February 26,1999
Common Stock, $1 Par Value 659,328,281
Shares
Documents Incorporated By Reference
Portions of the following documents are incorporated herein by reference:
Part of 10-K in
Document Which Incorporated
Xerox Corporation 1998 Annual Report to Shareholders I & II
Xerox Corporation Notice of 1999 Annual Meeting of III & IV
Shareholders and Proxy Statement (to be filed not
later than 120 days after the close of the fiscal
year covered by this report on Form 10-K).
Forward-Looking Statements
From time to time Xerox Corporation (the Registrant or the Company) and its
representatives may provide information, whether orally or in writing,
including certain statements in this Form 10-K under "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
which are deemed to be "forward-looking" within the meaning of the Private
Securities Litigation Reform Act of 1995 ("Litigation Reform Act"). These
forward-looking statements and other information relating to the Company are
based on the beliefs of management as well as assumptions made by and
information currently available to management.
The words "anticipate," "believe," "estimate," "expect," "intend," "will,"
and similar expressions, as they relate to the Company or the Company's
management, are intended to identify forward-looking statements. Such
statements reflect the current views of the Registrant with respect to
future events and are subject to certain risks, uncertainties and
assumptions. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Registrant does not intend to update
these forward-looking statements.
In accordance with the provisions of the Litigation Reform Act we are making
investors aware that such "forward-looking" statements, because they relate
to future events, are by their very nature subject to many important factors
which could cause actual results to differ materially from those contained
in the "forward-looking" statements. Such factors include but are not
limited to the following:
Competition - the Registrant operates in an environment of significant
competition, driven by rapid technological advances and the demands of
customers to become more efficient. There are a number of companies
worldwide with significant financial resources which compete with the
Registrant to provide document processing products and services in each of
the markets served by the Registrant, some of whom operate on a global
basis. The Registrant's success in its future performance is largely
dependent upon its ability to compete successfully in its currently-served
markets and to expand into additional market segments.
Transition to Digital - presently black and white light-lens copiers
represent approximately 40% of the Registrant's revenues. This segment of
the general office market is mature with anticipated declining industry
revenues as the market transitions to digital technology. Some of the
Registrant's new digital products replace or compete with the Registrant's
current light-lens equipment. Changes in the mix of products from light-
lens to digital, and the pace of that change as well as competitive
developments could cause actual results to vary from those expected.
Pricing - the Registrant's ability to succeed is dependent upon its ability
to obtain adequate pricing for its products and services which provide a
reasonable return to shareholders. Depending on competitive market factors,
future prices the Registrant can obtain for its products and services may
vary from historical levels.
Financing Business - a significant portion of the Registrant's profits arise
from the financing of its customers' purchases of the Registrant's
equipment. On average, 75 to 80 percent of equipment sales are financed
through the Registrant. The Registrant's ability to provide such financing
at competitive rates and realize profitable spreads is highly dependent upon
its own costs of borrowing which, in turn, depend upon its credit ratings.
Significant changes in such ratings could reduce the profitability of such
financing business and/or make the Registrant's financing less attractive to
customers thus reducing the volume of financing business done. The
Registrant's present credit ratings permit ready access to the credit
markets. There is no assurance that these credit ratings can be maintained
and/or ready access to the credit markets can be assured.
Productivity - the Registrant's ability to sustain and improve its profit
margins is largely dependent on its ability to maintain an efficient, cost-
effective operation. Productivity improvements through process
reengineering, design efficiency and supplier cost improvements are required
to offset labor cost inflation and potential materials cost changes and
competitive price pressures.
International Operations - the Registrant derives approximately half its
revenue from operations outside of the United States. In addition, the
Registrant manufactures many of its products and/or their components outside
the United States. The Registrant's future revenue, cost and profit results
could be affected by a number of factors, including changes in foreign
currency exchange rates, changes in economic conditions from country to
country, changes in a country's political conditions, trade protection
measures, licensing requirements and local tax issues.
New Products/Research and Development - the process of developing new high
technology products and solutions is inherently complex and uncertain. It
requires accurate anticipation of customers' changing needs and emerging
technological trends. The Registrant must then make long-term investments
and commit significant resources before knowing whether these investments
will eventually result in products that achieve customer acceptance and
generate the revenues required to provide anticipated returns from these
investments.
Restructuring - the Registrant's ability to ultimately reduce pre-tax annual
expenditures by approximately $1 billion is dependent upon its ability to
successfully implement the 1998 restructuring program including the
elimination of 9,000 net jobs worldwide, the closing and consolidation of
facilities, and the successful implementation of process and systems
changes.
Year 2000 - the Registrant's ability to complete its Year 2000 plan is
dependent upon the availability of resources, the Registrant's ability to
discover and correct the potential Year 2000 sensitive problems which could
have a serious impact on the Registrant's information management systems,
facilities and products, and the ability of the Registrant's suppliers and
customers to bring their systems into Year 2000 compliance.
PART I
Item 1. Business
Overview
Xerox Corporation (Xerox or the Company) is The Document Company and a
leader in the global document market, providing document solutions that
enhance business productivity. References herein to "us" or "our" refer to
Xerox and consolidated subsidiaries unless the context specifically requires
otherwise. We distribute our products in the Western Hemisphere through
divisions and wholly-owned subsidiaries. In Europe, Africa, the Middle East
and parts of Asia including India, China and Hong Kong, we distribute
through Xerox Limited and related companies (collectively Xerox Limited).
Fuji Xerox, an unconsolidated entity jointly owned by Xerox Limited and Fuji
Photo Film Company, Limited develops, manufactures and distributes document
processing products in Japan and the Pacific Rim. Japan represents
approximately 90 percent of Fuji Xerox revenues, and Australia, New Zealand,
Singapore, Malaysia and Korea represent the remaining 10 percent. Fuji
Xerox conducts business in other Pacific Rim countries through joint
ventures and distributors.
Since 1995, the results of our Insurance operations have been accounted for
as discontinued operations and the Document Processing business has been the
only component of continuing operations.
Our Document Processing activities encompass developing, manufacturing,
marketing, servicing and financing a complete range of document processing
products and solutions designed to make offices around the world more
productive. We believe that the document is a tool for productivity, and
that documents - both electronic and paper - are at the heart of most
business processes. Documents are the means for storing, managing, and
sharing business knowledge. Document technology is key to improving
productivity through information sharing and knowledge management and we
believe no one knows the document - paper to digital, digital to paper -
better than we do. The financing of Xerox equipment is generally carried
out by Xerox Credit Corporation (XCC) in the United States and
internationally by foreign financing subsidiaries and divisions in most
countries. Document Processing operations had 92,700 Xerox employees at
year-end 1998.
Continuing Operations
The Document Processing Strategy
We believe that documents represent the knowledge base of an organization
and play a dynamic and central role in business, government, education and
other organizations:
- - Increasingly, documents are being created and stored in digital
electronic form. In addition, the internet is increasing the amount of
information which can be accessed in the form of electronic documents.
- - While the percentage of printed documents will decline, the total of all
documents produced by organizations (printed and electronic) will grow at
an even faster rate.
- - This will result in an overall continuing increase in the volume of
printed documents.
As The Document Company, we believe that by helping our customers navigate
and manage the world of documents, we can help them improve their
productivity and grow their businesses. We help customers make documents
better, make better documents, and work better with documents.
We create customer value by providing innovative document technologies,
products, systems, services and solutions that allow our customers to:
- - Move easily within and between the electronic and paper forms of
documents.
- - Scan, store, retrieve, view, revise and distribute documents
electronically anywhere in the world.
- - Print or publish documents on demand, at the point closest to their
needs, including those locations of our customers' customers.
- - Integrate the currently separate modes of producing documents, such as
the data center, production publishing and office environments into a
seamless, user-friendly enterprise-wide document systems network - with
technology acting as an enabler.
We have formed alliances to bring together the diverse infrastructures that
currently exist and to nurture the development of an open document services
and solutions environment to support complementary products from our
partners and customers. We are working with more than 50 industry
organizations to make office, production and electronic printing an
integrated, seamless part of today's digital work place.
Market Overview
We estimate that the global document market that we serve, excluding Japan
and the Pacific Rim countries served by Fuji Xerox, was approximately $120
billion in 1998 and is estimated to grow to over $200 billion in 2001. With
our many new product introductions during this decade and in particular, the
transition from light-lens to digital technology, our participation in the
global document market has been considerably broadened from the slower
growing segments of the market to the faster growing segments of the market.
We are leading the transition in our industry from light-lens to digital
technology, from standalone devices to network-connected systems, from black
and white to color capable devices, and from box sales to services and
solutions which solve customer problems. Xerox growth will be driven by the
transition to digital copying and printing in the office, the transfer of
document production from offset printing to digital publishing, the increase
in customer requirements for network and distributed printing, the
accelerating demand for color documents, and increasingly, our participation
in the small office / home office / personal document processing market.
We have traditionally had a strong position in the general office document
market, the largest segment, which is projected to reach approximately $79
billion in 2001. Growth in this market is driven by the transition to the
use of digital and color documents. The production market, which includes
production publishing and production printing, is expected to reach $27
billion in 2001. The small office / home office / personal document
processing market is growing at an annual rate of more than 25 percent to
$48 billion by 2001 due to increases in the number of home offices and small
businesses. This market segment acquires product primarily through indirect
distribution channels. Document outsourcing, the fastest growing served
market segment, is projected to grow 35 to 40 percent annually, reaching $18
billion by 2001, as customers' increasingly focus on their core competencies
and outsource their document processing requirements. Finally, the portion
of the professional services market in which we participate through our 1998
acquisition of XLConnect, now Xerox Connect, an information technology
services company, is growing very rapidly, to $20 billion by 2001.
Xerox Focus
We believe that our competitive advantages lie in our ability to continually
improve the features and performance of our document processing products,
services and solutions based on demonstrated customer needs; competitive
pricing; our excellent reputation for performance and service; our
substantial on-going investment in research and development; expanded sales
coverage through our global direct sales force, agents and concessionaires;
our leadership position in the rapidly growing document outsourcing
business; maintenance of our strong market position in emerging markets; and
building on the strength of the Xerox brand, an expanded presence in the
burgeoning small office / home office / personal document processing market
through expansion of retail chains, value added resellers and systems
integrators, and increasingly telesales and e-commerce. As a result, we
believe we are well positioned to participate in the anticipated growth in
the market segments in which we compete.
Digital Products
Our digital products consist of five categories: black-and-white production
publishing, black-and-white production printing, color copying and printing,
black-and-white digital copiers, and channels/other. On a pre-currency
basis, digital product revenues grew 36 percent in 1998, 25 percent in 1997,
and 23 percent in 1996. The acceleration in digital product revenue growth
resulted in 1998 digital revenues exceeding light-lens copier revenues for
the first time. Revenues from digital products were 46 percent of total
revenues in 1998, 36 percent in 1997, and 30 percent in 1996.
Production Publishing
In 1990, we launched the era of production publishing when we announced the
introduction of our DocuTech Production Publishing family which was a major
step beyond our traditional reprographics market into the publishing
industry. Having installed more than 20,000 DocuTech systems around the
world to date, our production publishing revenues in 1998 grew 15 percent
pre-currency to $2.3 billion.
Digital production publishing technology is increasingly replacing older,
traditional short-run offset printing as customers seek improved
productivity and cost savings, faster turnaround of document preparation,
and the ability to print documents "on demand." We offer the widest range
of solutions available in the marketplace - from dial-up lines through the
Internet to state-of-the-art networks - and we are committed to expanding
these print-on-demand solutions as new technology and applications are
developed.
The DocuTech family of digital production publishers scans paper documents
and converts them into digital documents, or accepts digital documents
directly from networked personal computers or workstations. A user-friendly
electronic cut-and-paste workstation allows the manipulation of images or
the creation of new documents. For example, in only a few minutes, a page
of word-processed text, received over a network, can be combined with a
scanned photograph and enhanced electronically: cropped, positioned
precisely, rotated, brightened or sharpened. Digital masters can be
prepared in a fraction of the time necessary to prepare offset printing
plates, thereby allowing fast turnaround time. Further time can be saved,
and frequently significant inventory and shipping costs, by transmitting
electronically and printing where and when the documents are required. In
1998, we introduced DigiPath Production Software, a major productivity tool,
which allows a printer's customers to use the World Wide Web to streamline
print job submission and subsequent archiving, preparation, proofing, and
reprinting.
DocuTech prints high-resolution (600 dots per inch) pages at up to 180
impressions per minute. The in-line finisher staples completed sets or
finishes booklets with covers and thermal-adhesive bindings. Because the
finished document can be stored as a digital document, hard copy documents
can be printed on demand, or only as required, thus avoiding the long
production runs and high storage and obsolescence costs associated with
offset printing. The concept of print-on-demand took another major step
forward in 1995 when we introduced the DocuTech 6135. It makes print-for-
one publishing practical; personalized publishing runs can now be as short
as one or two prints. Further steps forward were taken in 1997 when the
DocuTech 6180 was introduced, increasing output speed to 180 cut-sheet pages
per minute and again in 1998 with the introduction of DocuTech 65 (65 pages
per minute) and DocuTech 6100, (96 pages per minute) making the technology
affordable for much smaller customers.
Production Printing
Revenue from monochrome production printing was $2.3 billion in 1998.
This market has largely consisted of high-end host-connected printers. We
expect future growth for robust, fully featured printers serving multiple
users on networks. This growth will be driven by the increase in personal
computers and workstations on networks, client-server processing,
accelerating growth in the demand for enterprise-wide distributed printing,
and declining electronics costs. These faster, more reliable printers print
collated multiple sets on both sides of the paper, insert covers and tabs,
and staple or bind, but without the labor-intensive steps of printing an
original and manually preparing the documents on copiers. In addition,
documents can be printed on these printers from remote data center
computers, enabling the efficiencies of distributing electronically and then
printing, rather than printing paper documents and then distributing them.
We have held the leading position in the production, high-volume computer
printing market segment since 1977. We are well positioned to capitalize on
the growth in the computer printing market because of our innovative
technologies and our understanding of customer requirements for distributed
printing from desktop and host computers. Our goal is to integrate office,
production and data-center computer printing into a single, seamless, user-
friendly network.
Xerox pioneered and continues to be a worldwide leader in computer laser
printing, which combines computer, laser, communications and xerographic
technologies. We market a broad line of robust printers with speeds up to
the industry's fastest cut-sheet printer at 180 pages per minute, and
continuous-feed production printers at speeds up to 1300 images per minute.
Many of these printers have simultaneous interfaces that can be connected to
multiple host computers as well as local area networks.
Breakthrough technology in our highlight color printers allows printing, in
a single pass, black-and-white plus one customer-changeable color (as well
as shades, tints, textures and mixtures of each) at production speeds up to
184 pages per minute. Other manufacturers' highlight color printers require
additional passes to add variable color, which increase cost, reduce speed
and reliability and introduce the possibility of color misalignment.
Productivity-enhancing features include printing collated multiple sets on
both sides of the paper, inserting covers and tabs, printing checks with
magnetic ink character recognition (MICR), and stapling or finishing with a
thermal adhesive binding; all on cut sheet plain paper, with sizes up to 11
by 17 inches.
In 1995, we significantly expanded our opportunities with the introduction
of two major new printer series that redefine our role in the electronic
production printing industry. With the DocuPrint CF Series family, we
entered the market for very high-volume, continuous-feed printers at speeds
up to 420 pages per minute. The DocuPrint IPS Series makes the IBM Advanced
Function Presentation (AFP) architecture directly available to our
production printing customers.
In 1997, we introduced the DocuPrint 180 that prints on one or both sides of
a page, on a wide variety of paper sizes and weights, and at 180 pages per
minute. We also introduced the DocuPrint 184 hc (highlight color) which
pairs two 92 page-per-minute Xerox highlight color laser printers with one
print server for cut-sheet, highlight color production speeds up to 184
pages per minute.
In 1998, we demonstrated the DocuPrint 900 and the DocuPrint 1300 models,
the first in a new class of ultra high-speed continuous feed production
printing systems. Printing at up to 900 and 1300 duplex impressions per
minute (200 and 300 feet per minute, respectively), these DocuPrint models
combine the high reliability and throughput of web printing with the
flexibility of electronic printing for unsurpassed productivity. These
models also offer a number of in-line finishing options, including cut-
sheet, fanfold, or roll and are compatible with many third party post-
processing devices.
Color Copying and Printing
Our revenues from color copying and printing grew 19 percent pre-currency in
1998 to $1.9 billion.
The use of color originals in the office is accelerating. Independent
studies have concluded that color documents are more effective at
communicating information and that decision-making performance improves with
the use of color documents. The vast majority of industry shipments of
workstations and personal computers have color monitors, creating the need
for economical, convenient and reliable, high-quality color copying and
printing.
The color market has largely consisted of ink-jet and laser copiers and
printers. Laser copiers and printers offer near-offset image quality,
excellent printing speeds, and the accessories necessary to produce finished
sets.
We entered the color laser market in 1991 with the introduction of a color
laser copier/printer and a color laser printer, each of which printed at 7.5
pages per minute. More recent product introductions include the DocuColor
40, introduced in early 1996, which copies and prints at 40 full-color pages
per minute and is the industry's fastest and most affordable digital color
document production system. It has a market share of more than 50 percent.
In 1997, we introduced the DocuColor 70, a continuous feed full-color
digital press, based on a print engine from Xeikon with Xerox-exclusive
digital front-ends, that produces 70 high-quality, full-color impressions
per minute and in 1998, we introduced the DocuColor 100 Digital Color Press,
also based on a Xeikon print engine with Xerox-exclusive digital front-ends,
that produces 100 high-quality full-color impressions per minute.
For the general office, in 1997 we introduced the DocuColor 5750 Empress
copier/printer which produces 6 full color copies per minute and the
DocuColor 5799 which operates at 9 full color copies per minute. For
networked workgroups, we introduced the DocuPrint C55, a full-featured,
compact color laser printer that prints three full color pages per minute
and includes automatic image enhancement and an embedded web server. In
1998, we introduced the DocuColor Office 6, a networked color copier/printer
for the office that operates at twice the speed of most desktop color laser
printers at the price of a mid-volume black and white copier. Also in 1998,
we expanded the DocuColor 40 line, adding the DocuColor 40 CP, a network-
connected color copier/printer equipped with a newly designed digital
controller, designed to provide digital walk up copying as well as network
printing for lower-volume environments. In March, 1999, we introduced the
DocuColor 30 Pro and the DocuColor 30 CP, both 30 page per minute digital
color copier/printers intended for entry-level production environments and
high-end color intensive offices and the DocuColor 4 LP, a laser printer
that operates at four full-color pages or 16 black and white pages per
minute. Finally, in the latter part of 1998 we announced our first entry
into the fast growing network color inkjet market, the DocuPrint C20 Color
Inkjet Printer that costs about one-third the price of a color laser printer
and have followed that with 1999 announcements including inkjet multi-
function devices.
Black and White Digital Copiers
The volume of paper documents used in the office continues to grow. Pages
per worker per day in the U.S. have doubled in the last decade and
productivity has been impaired by the need to manage documents on computer
monitors and as hard-copy originals.
We intend to help customers improve productivity by controlling their
documents from a common interface; managing from the desktop; eliminating
gaps, steps and devices in the work process; and moving smoothly from
digital to paper and back.
Our strategy is to build from our current strength, the copier. We know how
to design and build copiers with superior marking, paper handling and
finishing technology. We know our customers, their requirements and how to
sell sophisticated, fully featured copiers. In April 1997, we introduced
the Document Centre family of black and white digital copiers at speeds
ranging from 20 to 65 pages per minute, that are better quality, more
reliable, and more feature rich than light-lens copiers and are priced at a
modest premium over comparable light-lens copiers. This family is modular
in design, offering the capability of upgrading the standalone copier to
full network connectivity when the customer is ready.
Beginning in 1998, we began connecting the digital copiers to customers'
networks so that their digital copiers can also be used as robust, high-
speed network printers to gain incremental volume from computer printing and
ultimately to replace desktop printers and single-purpose copiers and fax
machines. The fax option and network upgrades have compelling economics
versus the alternative of purchasing comparable printers and faxes since the
print engine, output mechanics and most of the software required are part of
the base digital copier.
Revenue from the Document Centre family more than quadrupled in 1998,
reaching $1.8 billion. This product family alone represented about two-
thirds of the company's digital revenue growth. The proportion of digital
copiers installed with network connectivity continued to grow, with
approximately 45 percent of new 20 and 30 page per minute Document Centre
installations being network connected in December. Early results for the 65
page per minute Document Centre are equally promising; in the areas where
available, roughly 40 percent of December Document Centre 265 installations
were network connected.
Channels and Other Products
Revenues in this category grew 73 percent pre-currency to $0.7 billion in
1998, reflecting primarily network black and white laser printers sold
through indirect sales channels such as retail, dealers, and value added
resellers.
Significant market growth in the small office/home office and networked
office is represented by customers who typically acquire product through
indirect sales channels. In September, 1997, we launched the DocuPrint
family of monochrome network laser printers which initially included 24 and
32 page per minute laser printers and which were faster, more advanced and
less expensive than competitive models, offering "copier-like" features such
as multiple-set printing, stapling and collating. In 1998, we expanded the
DocuPrint line to include monochrome laser printers at speeds ranging from 8
- - 40 pages per minute.
Light-lens Copying
Our revenues from light-lens copiers declined 11 percent pre-currency in
1998 to $7.9 billion. The decline in light-lens copier revenues reflects
several important factors, including customer transition to our new digital
black-and-white products and continued price pressures. We believe the
trend over the past few years will continue whereby digital products'
revenues represent an increasing share of total revenues and light-lens
copier revenues represent a declining share of total revenues. Revenues
from light-lens copying represented 41 percent of total revenues in 1998, 51
percent in 1997 and 56 percent in 1996.
We market the broadest line of light-lens copiers and duplicators in the
industry, ranging from a three copies-per-minute personal copier to a 135
copies-per-minute full-featured duplicator. Many of our state-of-the-art
products have improved ease of use, reliability, copy quality, job recovery
and ergonomics as well as productivity-enhancing features, including zoom
enlargement and reduction, highlight color, copying on both sides of the
paper, and collating and stapling which allow the preparation of completed
document sets.
We have a strong position with major accounts that demand a consistently
high level of service worldwide. Our competitive advantages include a focus
on customer call response times, diagnostic equipment that is state-of-the-
art and availability of 24-hour-a-day, seven-day-a-week service.
We also are increasing our leadership position in the most competitive
copier market segment - small commercial accounts and small offices/home
offices - through increased indirect sales coverage including sales through
independent agents, retail outlets and trade associations and increased
marketing programs, such as telemarketing and advertising.
We expect that light-lens copiers will increasingly be replaced by digital
copiers. However, some portions of the market will continue to use light-
lens copiers for many years, such as customers who care principally about
price or whose work processes do not require digital products. Therefore,
we intend to continually upgrade our light-lens products to maintain a
leadership position in the industry.
Paper and Other Products
We also offer a wide range of other document processing products including
devices designed to reproduce large engineering and architectural drawings
up to 3 feet by 4 feet in size, facsimile products, and personal computer
and workstation software.
We also sell cut-sheet paper to our customers for use in their document
processing products.
Summary of Revenues by Product Category
The following table summarizes our revenues by major product category. The
revenues for light-lens copiers and digital products include equipment and
supplies sales, service, rental and document outsourcing revenues, and
finance income.
Year ended December 31 (in billions) 1998 1997 1996
Digital products $ 9.0 $ 6.6 $ 5.3
Light-lens copiers 7.9 8.9 9.7
Paper and other products 2.5 2.6 2.4
Total revenues $19.4 $18.1 $17.4
Xerox Competitive Advantages
Customer Satisfaction
Our highest priority is customer satisfaction. Our research shows that
satisfied customers are far more likely to repurchase products and that the
cost of selling a replacement product to a satisfied customer is far less
than selling to a "new" customer. We regularly survey customers on their
satisfaction, measure the results, analyze the root causes of
dissatisfaction, and take steps to correct any problems.
Because of our emphasis on customer satisfaction, we offer a Total
Satisfaction Guarantee, one of the simplest and most comprehensive offered
in any industry: "If you are not satisfied with our equipment, we will
replace it without charge with an identical model or a machine with
comparable features and capabilities." This guarantee applies for at least
three years to equipment acquired from and continuously maintained by Xerox
or its authorized agents.
Quality
We were an early pioneer in total quality management and are the only
company to have won all three of the following prestigious quality awards:
the Malcolm Baldrige National Quality Award in the United States in 1989;
the European Quality Award in 1992; and the Deming Prize in Japan, won by
Fuji Xerox in 1980. Xerox Business Services, our document outsourcing
division, also won the Baldrige Award in the service category in 1997. In
addition, we have won top quality awards in Argentina, Australia, Belgium,
Brazil, Canada, China (Shanghai), Colombia, France, Germany, Hong Kong,
India, Ireland, Mexico, the Netherlands, Norway, Portugal, the United
Kingdom, and Uruguay. Our "Leadership Through Quality" program has enabled
us to improve productivity, accelerate the introduction of new products,
improve customer satisfaction and increase market share. Xerox products
have been consistently rated among the worlds best by independent testing
organizations. In 1997, Xerox reinforced its position as an environmental
leader among Fortune 500 companies by receiving ISO 14001 certification for
all its major manufacturing sites worldwide, as set by the International
Standards Organization.
Research and Development
Xerox research and development (R&D) is directed toward the development of
new products and capabilities in support of our document processing
strategy. Our research scientists are deeply involved in the formulation of
corporate strategy and key business decisions. They regularly meet with
customers and have dialogues with our business divisions to ensure they
understand customer requirements and are focused on products that can be
commercialized.
In 1998, R&D expense was $1,043 million compared with $1,065 million in 1997
and $1,044 million in 1996. The modest reduction in 1998 reflected a
reprioritization of our spending to focus on areas intended to produce
significant growth, such as digital, color and solutions. We continue to
invest in technological development to maintain our premier position in the
rapidly changing document processing market with a heightened focus on
increasing the effectiveness of our R&D investment as well as time to
market. We expect the 1999 R&D growth rate will exceed the 1999 revenue
growth rate. Xerox R&D is strategically coordinated with Fuji Xerox, which
invested $636 million in R&D in 1998 for a combined total of $1.7 billion.
Marketing
Xerox document processing products are principally sold directly to
customers by our worldwide sales force, a source of competitive advantage,
totaling approximately 13,000 employees and through a network of independent
agents, dealers, retail chains, value-added resellers and systems
integrators. To market low-end copiers, laser printers, and multi-function
devices, we are significantly expanding our indirect distribution channels.
We currently have arrangements with U.S. retail marketing channels including
CompUSA, Office Depot, OfficeMax, and Staples, and office channels that
include distributors and value added resellers like Pinacor (formerly
MicroAge), Ingram Micro, Tech Data, and Computer 2000. In 1998 we expanded
our worldwide network of retail outlets and resellers by more than 40
percent. Our strategy is to target high-growth markets through high-volume
distribution of laser and ink-jet printers, multi-function products,
personal copiers, fax machines, and supplies, both for Xerox and competitive
equipment, with a goal to be the fastest growing source of personal and
networked document solutions in retail and reseller channels worldwide. In
1998 we began a major redesign of our Internet site to make it a more
powerful tool for electronic commerce. We have begun to sell Xerox
equipment and supplies over the Internet and will expand this initiative in
1999. We also plan to significantly expand our telebusiness capacity over
the next three years, including opening new telebusiness centers in North
America and Europe. Finally, we have increased our advertising spending.
Service
We have a worldwide service force of approximately 24,000 employees. In our
opinion, this direct service force represents a significant competitive
advantage: the service force is continually trained on our new products and
its diagnostic equipment is state-of-the-art. 24-hour-a-day, seven-day-a-
week service is available in most metropolitan areas in the United States.
We are able to guarantee a consistent level of service nationwide and
worldwide because we do not rely on independent local dealers for service
and our service force is not focused exclusively on metropolitan areas.
Revenues
Our total document processing revenues were $19.4 billion in 1998, of which
52 percent were generated in the United States, 28 percent in Europe, and 20
percent in the remainder of the world, principally Brazil, the rest of Latin
America, Canada, and China. The unconsolidated $6.8 billion of Fuji Xerox
revenues were generated in Japan and much of the Pacific Rim.
Revenues from supplies, paper, service, rentals, document outsourcing and
other revenues, and income from customer financing represented 62 percent of
total revenues in 1998, 63 percent in 1997, and 65 percent in 1996. Because
these revenues are derived from the installed base of equipment and are
therefore less volatile than equipment sales revenues, they provide
significant stability to overall revenues. Growth in these revenues is
primarily a function of the growth in our installed population of equipment,
usage and pricing. The balance of our revenues is derived from equipment
sales. These sales, which drive the non-equipment revenues, depend on the
flow of new products and are more affected by economic cycles from country
to country.
Most of our customers have their equipment serviced by and use supplies sold
by us. The market for cut-sheet paper is highly competitive and revenue
growth is significantly affected by pricing. Our strategy is to charge a
spread over mill wholesale prices. Rental revenues declined in 1998 and
1997 and were flat in 1996, due primarily to customers' preference for
document outsourcing and the continuing trend of increased equipment sales.
Our document outsourcing business provides printing, publishing, duplicating
and related services at more than 6,000 customer locations in 40 countries,
including legal and accounting firms, financial institutions, insurance
agencies and manufacturing companies. Revenues from our document
outsourcing business were $2.7 billion in 1998. Document outsourcing
revenues are split between equipment sales and document outsourcing. Where
document outsourcing contracts include revenue accounted for as equipment
sales, this revenue is included in equipment sales on the income statement.
All other document outsourcing revenue, including service, equipment rental,
supplies, paper and labor are included in document outsourcing. This has
the effect of diverting some revenues from supplies, paper, service, rental,
and finance income.
We offer our document processing customers financing of their purchases of
Xerox equipment primarily through XCC in the United States, largely through
wholly-owned financing subsidiaries in Europe, and through divisions in
Canada and Latin America. While competition for this business from banks
and other finance companies remains extensive, we actively market our
equipment financing services on the basis of customer service, convenience
and competitive rates. On average, 75 to 80 percent of equipment sales are
financed through Xerox.
International Operations
Our international operations account for 48 percent of Document Processing
revenues. Our largest interest outside the United States is Xerox Limited.
Marketing and manufacturing operations are also conducted through joint
ventures in India and China. Marketing and manufacturing in Latin America
are conducted through subsidiaries or distributors in over 35 countries.
Fuji Xerox develops, manufactures and distributes document processing
products in Japan and other areas of the Pacific Rim, Australia and New
Zealand.
Revenues in Brazil were $1.6 billion in 1998, $1.8 billion in 1997 and $1.6
billion in 1996. In the early part of 1999, the Brazilian real devalued
substantially against the U.S. dollar. Such devaluation could adversely
effect the Brazilian economy. However, we currently are unable to determine
what effect, if any, this situation will have on our customers' intent or
ability to purchase our products in 1999.
Our financial results by geographical area for 1998, 1997 and 1996, which
are presented on pages 24, 25, and 47 of the Company's 1998 Annual Report to
Shareholders, are hereby incorporated by reference in this document in
partial answer to this item.
Restructuring
On April 7, 1998, we announced a worldwide restructuring program associated
with enhancing our competitive position and lowering our overall cost
structure. In connection with this program, we recorded a second quarter
pretax provision of $1,644 million ($1,107 million after taxes, including
our $18 million share of a restructuring charge recorded by Fuji Xerox).
The program includes the elimination of approximately 9,000 jobs, net,
worldwide, the closing and consolidation of facilities, and the write-down
of certain assets.
Key initiatives of the restructuring include:
1. Consolidation of 56 European customer support centers into one facility
and implementing a shared services organization for order entry,
invoicing, and other back-office and sales operations.
2. Streamlining manufacturing logistics, distribution and service
operations. This will include centralizing U.S. parts depots and
outsourcing storage and distribution.
3. Overhauling our internal processes and associated resources, including
closing one of four geographically-organized U.S. customer administrative
centers with the remaining three refocused by customer segment, enabling
improved customer support at lower cost.
When fully implemented, the ongoing pre-tax savings from the restructuring
initiatives will be approximately $1 billion annually. Initially, more than
half of the savings is being reinvested to implement business process and
systems changes in order to enable the restructuring, and in ongoing efforts
to broaden and strengthen marketing programs and distribution channels to
enhance revenue growth. Selling, administrative and general expenses as a
percentage of revenue will move from the high 20's to the low 20's over
time, driven primarily by large reductions in overhead costs. Manufacturing
and service productivity will also improve. These benefits will be somewhat
offset by lower gross margins overall due to the increasing proportion of
business conducted through indirect sales channels and outsourcing.
Our restructuring disclosure, presented on pages 28, 29, 42, and 43 of the
Company's 1998 Annual Report to Shareholders, is hereby incorporated by
reference in this document.
Acquisition of XLConnect Solutions
In May 1998, we acquired XLConnect Solutions, Inc. (XLConnect), an
information technology services company, and its parent company, Intelligent
Electronics, Inc. for $413 million in cash. The operating results of these
companies, which are not material, have been included in our consolidated
statements of income from the date of the acquisition. Based on the
allocation of the purchase price, the transaction resulted in goodwill of
$395 million (including transaction costs) which is being amortized over 25
years.
Discontinued Operations - Insurance and Other Financial Services
The discussion under the caption "Discontinued Operations - Insurance and
Other Financial Services" on pages 38 and 39 set forth under the caption
"Financial Review" and the information set forth under Note 10 "Discontinued
Operations" on pages 47 through 49 in the Company's 1998 Annual Report to
Shareholders are hereby incorporated by reference in this document in
partial answer to this item.
As discussed in the incorporated sections referenced in the preceding
paragraph, in 1998, the last remaining Talegen Holdings, Inc. insurance
companies were sold and an additional after-tax charge of $190 million was
recorded. At the end of 1998, our sole remaining Insurance operation is the
Ridge Reinsurance Limited reinsurance business. Our other discontinued
businesses, consisting of Other Financial Services and Third Party Financing
and Real Estate, are primarily in asset and liability run-off.
Item 2. Properties
The Company owns a total of eleven principal manufacturing and engineering
facilities and leases an additional such facility. The domestic facilities
are located in California, New York and Oklahoma, while the international
facilities are located in Brazil, Canada, England, France, Holland and
Mexico. The Company also has four principal research facilities; two are
owned facilities in New York and Canada, and two are leased facilities in
California and France.
In addition, within the Company, there are numerous facilities that
encompass general offices, sales offices, service locations and distribution
centers. The principal owned facilities are located in the United States,
England, and Mexico. The principal leased facilities are located in the
United States, Brazil, Canada, England, Mexico, France, Germany and Italy.
The Company's Corporate Headquarters facility, located in Connecticut, is
leased. A training facility, located in Virginia, is owned by the Company.
In the opinion of Xerox management, its properties have been well
maintained, are in sound operating condition and contain all the necessary
equipment and facilities to perform the Company's functions.
Item 3. Legal Proceedings
The information set forth under Note 15 "Litigation" on pages 57 and 58 of
the Company's 1998 Annual Report to Shareholders is incorporated by
reference in this document in answer to this item.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market Information, Holders and Dividends
The information set forth under the following captions on the indicated
pages of the Company's 1998 Annual Report to Shareholders is hereby
incorporated by reference in this document in answer to this Item:
Caption Page No.
Stock Listed and Traded 68
Xerox Common Stock Prices and Dividends 68
Eleven Years in Review - Common Shareholders
of Record at Year-End 64 and 65
Recent Sales of Unregistered Securities
During the quarter ended December 31, 1998, Registrant issued the following
securities in transactions that were not registered under the Securities Act
of 1933, as amended (the Act):
(a) Securities Sold: On October 1, 1998, Registrant issued 1,215 shares of
Common stock, par value $1 per share.
(b) No underwriters participated. The shares were issued to each of the
non-employee Directors of Registrant: B.R. Inman, A.A.Johnson, V.E. Jordan,
Jr., Y. Kobayashi, H. Kopper, R.S. Larsen, G.J. Mitchell, N.J. Nicholas,
Jr., J.E. Pepper, P. F. Russo, M.R. Seger and T.C.Theobald.
(c) The shares were issued at a deemed purchase price of $84.75 per share
(aggregate price $102,625), based upon the market value on the date of
issuance, in payment of the quarterly Directors' fees pursuant to
Registrant's Restricted Stock Plan for Directors.
(d) Exemption from registration under the Act was claimed based upon
Section 4(2) as a sale by an issuer not involving a public offering.
Item 6. Selected Financial Data
The following information, as of and for the five years ended December 31,
1998, as set forth and included under the caption "Eleven Years in Review"
on pages 64 and 65 of the Company's 1998 Annual Report to Shareholders, is
hereby incorporated by reference in this document in answer to this Item:
Revenues
Income (loss) from continuing operations
Per-Share Data - Earnings (loss) from continuing operations
Total assets
Long-term debt
Preferred stock
Per-Share Data - Dividends declared
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information set forth under the caption "Results of Operations and
Financial Condition" under the caption "Financial Review" on pages 22, 24-
32, 34-35, and 37-39 of the Company's 1998 Annual Report to Shareholders
other than the pictures and captions to the pictures is hereby incorporated
by reference in this document in answer to this Item.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The information set forth under the caption "Risk Management" on pages 35
and 37 of the Company's 1998 Annual Report to Shareholders other than the
picture and caption to the picture is hereby incorporated by reference in
this document in answer to this Item.
Item 8. Financial Statements and Supplementary Data
The consolidated financial statements of Xerox Corporation and subsidiaries
and the notes thereto and the report thereon of KPMG LLP, independent
auditors, which appear on pages 23, 33, 36, 40-61 and 63 of the Company's
1998 Annual Report to Shareholders, are hereby incorporated by reference in
this document in answer to this Item. In addition, also included is the
quarterly financial data included under the caption "Quarterly Results of
Operations (Unaudited)" on page 62 of the Company's 1998 Annual Report to
Shareholders.
The financial statement schedule required herein is filed as "Financial
Statement Schedules" pursuant to Item 14 of this Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
The information set forth in "Proposal 1--Election of Directors" in the
Company's Notice of the 1999 Annual Meeting of Shareholders and Proxy
Statement, to be filed pursuant to Regulation 14A not later than 120 days
after the close of the fiscal year covered by this report on Form 10-K, is
hereby incorporated by reference in this document in answer to this Part
III.
Executive Officers of Xerox
The following is a list of the executive officers of Xerox, their current
ages, their present positions and the year appointed to their present
positions. There are no family relationships between any of the executive
officers named.
Each officer is elected to hold office until the meeting of the Board of
Directors held on the day of the next annual meeting of shareholders,
subject to the provisions of the By-Laws.
Year
Appointed
to Present Officer
Name Age Present Position Position Since_
Paul A. Allaire* 60 Chairman of the Board, Chief 1991 1983
Executive Officer and Chairman
of the Executive Committee
G. Richard Thoman* 54 President and Chief 1997 1997
Operating Officer
William F. Buehler 59 Executive Vice President 1999 1991
Industry Solutions Operations
Allan E. Dugan 58 Executive Vice President 1999 1990
Business Group Operations
Anne M. Mulcahy 46 Executive Vice President 1999 1992
General Markets Operations
Carlos Pascual 53 Executive Vice President 1999 1994
Deputy Executive Officer,
Industry Solutions Operations
Barry D. Romeril 55 Executive Vice President and 1993 1993
Chief Financial Officer
Patrick J. Martin 58 Senior Vice President 1999 1992
President, Developing Markets
Operations
Michael Miron 43 Senior Vice President 1998 1998
Corporate Business Strategy
and Development
Hector J. Motroni 55 Senior Vice President and 1999 1994
Chief Staff Officer
* Member of Xerox Board of Directors.
Executive Officers of Xerox, Continued
Year
Appointed
to Present Officer
Name Age Present Position Position Since_
Mark B. Myers 60 Senior Vice President 1992 1989
Xerox Research and Technology
Richard S. Paul 57 Senior Vice President and 1992 1989
General Counsel
Eunice M. Filter 58 Vice President, Treasurer 1990 1984
and Secretary
Philip D. Fishbach 57 Vice President and Controller 1995 1990
Each officer named above, with the exception of G. Richard Thoman and
Michael Miron, has been an officer or an executive of Xerox or its
subsidiaries for at least the past five years.
Prior to joining Xerox in 1997, Mr. Thoman had been with International
Business Machines Corporation (IBM) where he was Senior Vice President and
Chief Financial Officer from 1995 to 1997, and Group Executive for the
Personal Systems Group from 1994 to 1995. He was President and CEO of
Nabisco International from 1992 to 1994. He was Chairman and Co-CEO of
Travel Related Services for American Express from 1989 to 1992.
Prior to joining Xerox in 1998, Mr. Miron had been with Airtouch
Communications where he was Vice President, Corporate Strategy and
Development from 1996 to 1998. Prior to this he was with Salomon Brothers
Inc. where he was Managing Director, Strategic Planning and Analysis from
1994 to 1996, and Director, Strategy and Consulting Group from 1990 to 1993.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) (1) and (2) The financial statements, independent auditors' reports
and Item 8 financial statement schedules being filed herewith or
incorporated herein by reference are set forth in the Index to
Financial Statements and Schedule included herein.
(3) The exhibits filed herewith or incorporated herein by reference
are set forth in the Index of Exhibits included herein.
(b) No Current Reports on Form 8-K were filed during the last quarter of
the period covered by this Report.
(c) The management contracts or compensatory plans or arrangements listed
in the Index of Exhibits that are applicable to the executive officers
named in the Summary Compensation Table which appears in Registrant's
1999 Proxy Statement are preceded by an asterisk (*).
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
XEROX CORPORATION
By: /s/ Barry D. Romeril_________
Executive Vice President and
Chief Financial Officer
March 22, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
March 22, 1999
Signature Title
Principal Executive Officer:
Paul A. Allaire /s/ Paul A. Allaire______________
Chairman, Chief Executive Officer
and Director
Principal Financial Officer:
Barry D. Romeril /s/ Barry D. Romeril_____________
Executive Vice President and
Chief Financial Officer
Principal Accounting Officer:
Philip D. Fishbach /s/ Philip D. Fishbach___________
Vice President and Controller
Directors:
/s/ B. R. Inman Director
/s/ Antonia Ax:son Johnson Director
/s/ Vernon E. Jordan, Jr. Director
/s/ Hilmar Kopper Director
/s/ Ralph S. Larsen Director
/s/ George J. Mitchell Director
/s/ N. J. Nicholas, Jr. Director
/s/ John E. Pepper Director
/s/ Patricia F. Russo Director
/s/ Martha R. Seger Director
/s/ Thomas C. Theobald Director
/s/ G. Richard Thoman Director
Report of Independent Auditors
To the Board of Directors and Shareholders of Xerox Corporation
Under date of January 25, 1999, we reported on the consolidated balance
sheets of Xerox Corporation and subsidiaries as of December 31, 1998 and
1997, and the related consolidated statements of income, cash flows and
shareholders' equity for each of the years in the three-year period ended
December 31, 1998, as contained in the Xerox Corporation 1998 Annual Report
to Shareholders on pages 23, 33, 36, and 40-61. These consolidated
financial statements and our report thereon are incorporated by reference in
the 1998 Annual Report on Form 10-K. In connection with our audits of the
aforementioned consolidated financial statements, we also have audited the
related financial statement schedule listed in the accompanying index. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
KPMG LLP
Stamford, Connecticut
January 25, 1999
Index to Financial Statements and Schedule
Financial Statements:
Consolidated statements of income of Xerox Corporation and subsidiaries
for each of the years in the three-year period ended December 31, 1998
Consolidated balance sheets of Xerox Corporation and subsidiaries as of
December 31, 1998 and 1997
Consolidated statements of cash flows of Xerox Corporation and
subsidiaries for each of the years in the three-year period ended
December 31, 1998
Consolidated statements of shareholders' equity of Xerox Corporation
and subsidiaries for each of the years in the three-year period ended
December 31, 1998
Notes to consolidated financial statements
Report of Independent Auditors
Quarterly Results of Operations (unaudited)
The above consolidated financial statements, related notes, report
thereon and the quarterly results of operations which appear on pages
23, 33, 36, 40-61, 63, and 62 of the Company's 1998 Annual Report to
Shareholders are hereby incorporated by reference in this document.
Commercial and Industrial (Article 5) Schedule:
II - Valuation and qualifying accounts
All other schedules are omitted as they are not applicable, or the
information required is included in the financial statements or notes
thereto.
SCHEDULE II
Valuation and Qualifying Accounts
Year ended December 31, 1998, 1997 and 1996
Additions
Balance at charged to Deductions, Balance
beginning costs and net of at end
(in millions) of period expenses recoveries of period
1998
Allowance for Losses on:
Accounts Receivable $ 92 $ 78 $ 68 $102
Finance Receivables 389 223 171 441
Deferred Tax Valuation
Allowance - - - -
$481 $301 $239 $543
1997
Allowance for Losses on:
Accounts Receivable $ 92 $ 84 $ 84 $ 92
Finance Receivables 347 181 139 389
Deferred Tax Valuation
Allowance - - - -
$439 $265 $223 $481
1996
Allowance for Losses on:
Accounts Receivable $ 90 $ 73 $ 71 $ 92
Finance Receivables 322 186 161 347
Deferred Tax Valuation
Allowance 20 - 20 -
$432 $259 $252 $439
Index of Exhibits
Document and Location
(3) (a) Restated Certificate of Incorporation of Registrant filed by the
Department of State of New York on October 29, 1996.
Incorporated by reference to Exhibit 3(a)(1) to Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30,
1996.
(b) By-Laws of Registrant, as amended through January 25, 1999.
Incorporated by reference to Exhibit (2) to Amendment No. 4 to
Registrant's Registration Statement on Form 8-A dated January 26,
1999.
(4) (a) Indenture dated as of January 15, 1990 between Registrant and
BankAmerica National Trust Company (as successor in interest to
Security Pacific National Trust Company (New York)) relating
to unlimited amounts of debt securities which may be issued
from time to time by Registrant when and as authorized by or
pursuant to a resolution of Registrant's Board of Directors.
Incorporated by reference to Exhibit 4(a) to Registration No.
33-33150.
(b) Indenture dated as of December 1, 1991 between Registrant and
Citibank, N.A. relating to unlimited amounts of debt securities
which may be issued from time to time by Registrant when and
as authorized by or pursuant to a resolution of Registrant's
Board of Directors.
Incorporated by reference to Exhibit 4(a) to Registration Nos.
33-44597, 33-49177 and 33-54629.
(c) Indenture dated as of September 20, 1996 between Registrant and
Citibank, N.A. relating to unlimited amounts of debt securities
which may be issued from time to time by Registrant when and as
authorized by or pursuant to a resolution of Registrant's Board
of Directors.
Incorporated by reference to Exhibit 4(a) to Registration
Statement No. 333-13179.
(d) Indenture dated as of October 1, 1997 among Registrant, Xerox
Overseas Holding Limited (formerly Xerox Overseas Holding PLC),
Xerox Capital (Europe) plc (formerly Xerox Capital (Europe) plc)
and Citibank, N.A. relating to unlimited amounts of debt
securities which may be issued from time to time by Registrant and
unlimited amounts of guaranteed debt securities which may be
issued from time to time by the other issuers when and as
authorized by or pursuant to a resolution or resolutions of the
Board of Directors of Registrant or the other issuers, as
applicable.
Incorporated by reference to Exhibit 4(b) to Registration
Statement Nos. 333-34333, 333-34333-01 and 333-34333-02.
(e) Indenture dated as of April 21, 1998 between Registrant and The
First National Bank of Chicago relating to $1,012,198,000
principal amount at maturity of Registrant's Convertible
Subordinated Debentures due 2018.
Incorporated by reference to Exhibit 4(b) to Registration
Statement No. 333-59355.
(f) Indenture dated as of March 1, 1988, as supplemented by the First
Supplemental Indenture dated as of July 1, 1988, between Xerox
Credit Corporation (XCC) and The First National Bank of Chicago
relating to unlimited amounts of debt securities which may be
issued from time to time by XCC when and as authorized by XCC's
Board of Directors or the Executive Committee of the Board of
Directors.
Incorporated by reference to Exhibit 4(a) to XCC's Registration
Statement No. 33-20640 and to Exhibit 4(a)(2) to XCC's Current
Report on Form 8-K dated July 13, 1988.
(g) Indenture dated as of March 1, 1989, as supplemented by the First
Supplemental Indenture dated as of October 1, 1989, between XCC
and Citibank, N.A. relating to unlimited amounts of debt
securities which may be issued from time to time by XCC when and
as authorized by XCC's Board of Directors or Executive Committee
of the Board of Directors.
Incorporated by reference to Exhibit 4(a) to XCC's Registration
Statement No. 33-27525.
(h) Indenture dated as of October 2, 1995, between XCC and State
Street Bank and Trust Company relating to unlimited amounts of
debt securities which may be issued from time to time by XCC when
and as authorized by XCC's Board of Directors or Executive
Committee of the Board of Directors.
Incorporated by reference to Exhibit 4(a) to XCC's Registration
Statement Nos. 33-61481 and 333-29677.
(i) Instruments with respect to long-term debt where the total amount
of securities authorized thereunder does not exceed 10% of the
total assets of the Registrant and its subsidiaries on a
consolidated basis have not been filed. The Registrant agrees to
furnish to the Commission a copy of each such instrument upon
request.
(10) The management contracts or compensatory plans or arrangements
listed below that are applicable to the executive officers named
in the Summary Compensation Table which appears in Registrant's
1999 Proxy Statement are preceded by an asterisk (*).
*(a) Registrant's 1976 Executive Long-Term Incentive Plan, as amended
through February 4, 1991.
Incorporated by reference to Exhibit (10)(a) to the Registrant's
Annual Report on Form 10-K for the Year Ended December 31, 1991.
*(b) Registrant's 1991 Long-Term Incentive Plan, as amended through
May 15, 1997.
Incorporated by reference to Registrant's Notice of the 1997
Annual Meeting of Shareholders and Proxy Statement pursuant to
Regulation 14A.
(c) Registrant's 1996 Non-Employee Director Stock Option Plan.
Incorporated by reference to Registrant's Notice of the 1996
Annual Meeting of Shareholders and Proxy Statement pursuant to
Regulation 14A.
*(d) Description of Registrant's Annual Performance Incentive Plan.
*(e) Registrant's 1997 Restatement of Registrant's Unfunded Retirement
Income Guarantee Plan.
Incorporated by reference to Exhibit 10(e) to Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30,
1997.
*(f) 1997 Restatement of Registrant's Unfunded Supplemental Retirement
Plan.
Incorporated by reference to Exhibit 10(f) to Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30,
1997.
(g) Registrant's 1981 Deferred Compensation Plan, 1985
Restatement, as amended through April 2, 1990.
Incorporated by reference to Exhibit 10(h) to Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended March 31,
1990.
(h) 1996 Amendment and Restatement of Registrant's Restricted Stock
Plan for Directors.
Incorporated by reference to Registrant's Notice of the 1996
Annual Meeting of Shareholders and Proxy Statement pursuant to
Regulation 14A.
*(i) Form of severance agreement entered into with various executive
officers.
Incorporated by reference to Exhibit 10(j) to Registrant's
Quarterly Report on Form 10-Q for the Quarter ended June 30,
1989.
*(j) Registrant's Contributory Life Insurance Program, as amended as of
January 30, 1998.
Incorporated by reference to Exhibit 10(j) to Registrant's
Annual Report on Form 10-K for the Year Ended December 31, 1997.
(k) Registrant's Deferred Compensation Plan for Directors, 1997
Amendment and Restatement.
Incorporated by reference to Exhibit 10(k) to Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30,
1997.
*(l) Registrant's Deferred Compensation Plan for Executives, 1997
Amendment and Restatement.
Incorporated by reference to Exhibit 10(l) to Registrant's
Quarterly Report on Form 10-Q for the Quarter Ended September 30,
1997.
*(m) Executive Performance Incentive Plan.
Incorporated by reference to Registrant's Notice of the 1995
Annual Meeting of Shareholders and Proxy Statement pursuant to
Regulation 14A.
*(n) Registrant's 1998 Employee Stock Option Plan.
Incorporated by reference to Registrant's Notice of the 1998
Annual Meeting of Shareholders and Proxy Statement pursuant to
Regulation 14A.
(11) Statement re computation of per share earnings.
(12) Computation of Ratio of Earnings to Fixed charges.
(13) Pages 22 through 65 and 68 of Registrant's 1998 Annual Report
to Shareholders.
(21) Subsidiaries of the Registrant.
(23) Consent of KPMG LLP.
(27) Financial Data Schedule (in electronic form only).