SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported):
April 1, 2002
XEROX CORPORATION
(Exact name of registrant as specified in its charter)
New York 1-4471 16-0468020
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) No.)
800 Long Ridge Road
P. O. Box 1600
Stamford, Connecticut 06904-1600
(Address of principal executive offices)(Zip Code)
Registrant's telephone number, including area code:
(203) 968-3000
Not Applicable
(Former name or former address, if changed since last report)
Item 5. Other Events.
Registrant announced today that it has reached an agreement in principle
with the Division of Enforcement of the Securities and Exchange Commission,
the terms of which the Division has agreed to recommend to the Commission.
The agreement in principle concerns the settlement of proposed allegations
on matters that have been under investigation since June 2000.
The proposed agreement is subject to the approval of the Commission.
The agreement in principle calls for a restatement of Registrant's
financials for the years 1997 through 2000 as well as an adjustment of
previously announced 2001 results. The restatement will primarily reflect
adjustments in the timing and allocation of lease revenue recognition and
could involve a reallocation of equipment sales revenue in excess of
$2 billion from 1997 through 2000. Those revenues will be reallocated
among equipment, service and finance revenue streams as appropriate
applying a methodology different than the one Registrant had used during
those years. The resulting timing and allocation adjustments cannot be
estimated until the restatement process has been completed. In any event,
there will be no impact on the cash that has been received or is
contractually due to be received from these leases. Furthermore, the
monetary value of the leases does not change. The restatement will also
include adjustments that could be in excess of $300 million due to the
establishment and release of certain reserves prior to 2001 and other
miscellaneous items.
To allow for the additional time required to prepare the restatement and
to make these adjustments, Registrant is filing a Form 12b-25 for a 15-day
extension on the filing of its 2001 10-K. In anticipation of a further
extension that may be necessary, Registrant has discussed with the Staff
circumstances under which Registrant may seek approval from the Commission
for a further extension of 75 days to complete its restatement and file
its 2001 10-K, including the condition that a signed agreement, ready for
presentation to the Commission, is reached by Registrant and the Staff
by April 8, and that a definitive settlement is thereafter approved by
the Commission.
Registrant initiated settlement discussions with the Staff last month
after Registrant was notified of the Division's preliminary decision to
recommend an enforcement action regarding Registrant's alleged violations
of the federal securities laws in connection with Registrant's financial
statements for 1997-2000. In addition to the restatement, the agreement
in principle calls for the SEC to file a complaint and a consent order in
federal district court for injunctive relief and a civil penalty of
$10 million. Registrant would neither admit nor deny the allegations of
the complaint, which would include claims of civil violations of the
antifraud, reporting and other provisions of the securities laws.
Registrant sells most of its products and services under bundled contracts
that contain multiple deliverable elements. The contracts typically
include equipment, service, supplies, and financing components for which
the customer pays a single monthly-negotiated price as well as a variable
service component for page volumes in excess of stated minimums. The SEC
claims that Registrant's revenue-allocation methodology for these contracts
did not comply with the Statement of Financial Accounting Standards No. 13.
Registrant has changed its revenue allocation methodology to estimate
"normal selling prices" (fair value) of equipment using an approach based
on verifiable objective evidence of value, including prices achieved in
its cash sales and other market based information.
"In the past year, we have made substantial improvements in our operations
through a bold and comprehensive turnaround program," said Anne M.
Mulcahy, Registrant's Chairman and Chief Executive Officer. "We have
proven that, when faced with difficult decisions, we take the appropriate
actions that will serve Xerox best for the long term, strengthening the
company's value proposition for our customers and shareholders. That's
why we believe Xerox is best served by putting these issues with the SEC
behind us and focusing on restoring the company to good health, sustained
profitability and future growth."
Mulcahy also noted that significant progress has been made in Registrant's
negotiations with the revolver lenders. The principal terms and
conditions for refinancing a portion of the revolver and extending its
maturity beyond October 2002 have been distributed to the 57 lenders in
the revolver. The refinancing is expected to be finalized following the
approval from these lenders as well as the negotiation and execution of
the definitive agreements.
___________________________________________________________________________
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Registrant has duly authorized this report to be signed on its behalf by
the undersigned duly authorized.
XEROX CORPORATION
/s/ MARTIN S. WAGNER
----------------------------
By: MARTIN S. WAGNER
Assistant Secretary
Date: April 1, 2002