Exhibit 12(b)
Xerox Corporation
Computation of Ratio of Earnings to Fixed Charges
Nine months ended Year ended
(In millions) September 30, December 31,
2000* 1999 1999 1998** 1997 1996 1995
Fixed charges:
Interest expense $ 739 $ 606 $ 803 $ 749 $ 617 $ 592 $ 603
Rental expense 92 94 132 145 140 140 142
Total fixed charges
before capitalized
interest and preferred
stock dividends of
subsidiaries 831 700 935 894 757 732 745
Preferred stock dividends
of subsidiaries 41 41 55 55 50 - -
Capitalized interest 9 3 8 - - - -
Total fixed charges $ 881 $ 744 $ 998 $ 949 $ 807 $ 732 $ 745
Earnings available for
fixed charges:
Earnings*** $(325) $1,671 $2,104 $837 $2,268 $2,067 $1,980
Adjustment to reflect
distributed income
from minority owned
companies (20) (39) (68) (27) (84) (84) (90)
Add fixed charges before
capitalized interest
and preferred stock
dividends of
subsidiaries 831 700 935 894 757 732 745
Total earnings
available for
fixed charges $ 486 $2,332 $2,971 $1,704 $2,941 $2,715 $2,635
Ratio of earnings to
fixed charges (1)(2) * 3.14 2.98 1.80 3.64 3.71 3.54
(1) The ratio of earnings to fixed charges has been computed based on the
Company's continuing operations by dividing total earnings available for
fixed charges, excluding capitalized interest and preferred stock
dividends of subsidiaries, by total fixed charges. Fixed charges
consist
of interest, including capitalized interest and preferred stock
dividends
of subsidiaries, and one-third of rent expense as representative of the
interest portion of rentals.
(2) The Company's ratio of earnings to fixed charges includes the effect of
the Company's finance subsidiaries, which primarily finance Xerox
equipment. Financing businesses are more highly leveraged and,
therefore, tend to operate at lower earnings to fixed charges ratio
levels than do non-financial businesses.
* Earnings for the first nine months of 2000 were inadequate to cover
fixed charges. The coverage deficiency was $395 million. Excluding
charges for special items - the 2000 restructuring, CPID in-process R&D
charge, and Mexico provision - the ratio of earnings to fixed charges
would be 1.48.
** Excluding the effects of the charges recorded in connection with the
1998 restructuring plan, the ratio of earnings to fixed charges would be
3.55.
*** Sum of "Income (Loss) before Income Taxes (Benefits), Equity Income and
Minorities' Interests" and "Equity in Net Income of Unconsolidated
Affiliates."
