Second-quarter earnings slid at Xerox ( XRX) due to a tax gain in the year-ago period, but the copier company managed to beat analysts' forecasts. Xerox earned $260 million, or 26 cents a share, in the quarter, compared with $423 million, or 40 cents a share, in the year-ago quarter, which included a $233 million income-tax benefit. Analysts had been forecasting earnings of 23 cents a share in the latest quarter. Gross margin in the latest quarter was 41.1%, up 0.7 percentage points from a year ago and up 1 percentage point from the first quarter. The company's overhead expense totaled 25.6% of revenue in the latest quarter, down from 26.7% a year ago. Total revenue rose 1% from last year to $3.98 billion, topping the $3.95 billion Thomson First Call consensus. Product sales rose 3% to $1.88 billion, while services, outsourcing and rental revenue rose 1%, also to $1.88 billion. Xerox expects to earn 20 cents to 22 cents a share in full-year 2006. Analysts were forecasting earnings of 23 cents a share, according to First Call. "Our second-quarter performance reflects the positive track Xerox is on to grow revenue while remaining cost-effective and competitive," Xerox said. "Revenue is up -- the benefit of increasing install rates of Xerox digital and color systems as well as continued demand for our document management services, all of which fuels our healthy annuity stream. Through a disciplined focus on costs and operational improvements, we increased gross margins and delivered solid bottom-line results."