UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 11-K
(Mark One)
[X] Annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2004 or
[ ] Transition report pursuant to Section 15(d) of the Securities Exchange Act of 1934 for the transition period from to .
Commission file number 1-5964
A. Full title of the plan and the address of the plan, if different from that of the issuer named below:
IKON OFFICE SOLUTIONS, INC. RETIREMENT SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office:
IKON OFFICE SOLUTIONS, INC., 70 Valley Stream Parkway, Malvern, PA 19355
REQUIRED INFORMATION
| a. | Financial Statements |
| 1. | Audited Statements of Net Assets Available for Benefits - December 31, 2004 and 2003 |
| 2. | Audited Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2004 and 2003 |
| 3. | Notes to Financial Statements |
| 4. | Supplemental Schedules |
| (a) | Schedule of Assets (Held at End of Year) |
| (b) | Schedule of Reportable Transactions |
| b. | Exhibits |
| | Exhibit 23(a) - Consent of Independent Registered Public Accounting Firm |
IKON Office Solutions, Inc.
Retirement Savings Plan
Financial Statements and Supplemental Schedules
December 31, 2004 and 2003
Index
December 31, 2004 and 2003
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Financial Statements | |
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Supplemental Schedules * | |
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* Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 have been omitted because they are not applicable.
To the Participants and Administrator of
IKON Office Solutions, Inc. Retirement Savings Plan
In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the IKON Office Solutions, Inc. Retirement Savings Plan (the “Plan”) at December 31, 2004 and 2003, and the changes in net assets available for benefits for the years then ended in conformity with the accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held at end of year and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan’s management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
June 28, 2005
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
| | | 2004 | | 2003 | |
Assets | | | | | |
| Investments, at fair value | | $ | 608,256,659 | | $ | 573,789,475 | |
| Receivables | | | | | | | |
| Investment income receivable | | | 345,471 | | | 160,697 | |
| Receivable for investments sold | | | 864,122 | | | 1,344,665 | |
| Employer contributions receivable | | | 3,819,524 | | | 3,964,749 | |
| Employee contributions receivable | | | 1,732,019 | | | 386,896 | |
| Total receivables | | | 6,761,136 | | | 5,857,007 | |
| Total assets | | | 615,017,795 | | | 579,646,482 | |
Liabilities | | | | | | | |
| Accrued administrative expenses | | | 128,719 | | | 408,380 | |
| Payable for investments purchased | | | 297,340 | | | - | |
| Total liabilities | | | 426,059 | | | 408,380 | |
| Net assets available for benefits | | $ | 614,591,736 | | $ | 579,238,102 | |
The accompanying notes are an integral part of these financial statements.
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2004 and 2003
| | | 2004 | | 2003 | |
Additions | | | | | |
| Investment income | | | | | | | |
| Net appreciation in fair value of investments | | $ | 15,761,050 | | $ | 157,687,772 | |
| Interest and dividends | | | 18,485,830 | | | 9,180,997 | |
| | | | 34,246,880 | | | 166,868,769 | |
| Contributions | | | | | | | |
| Participant | | | 53,973,707 | | | 45,587,175 | |
| Employer | | | 16,980,071 | | | 16,644,095 | |
| | | | 70,953,778 | | | 62,231,270 | |
| Total additions | | | 105,200,658 | | | 229,100,039 | |
Deductions | | | | | | | �� |
| Payment of benefits | | | 67,901,781 | | | 62,771,998 | |
| Administrative expenses | | | 1,945,243 | | | 2,815,081 | |
| Total deductions | | | 69,847,024 | | | 65,587,079 | |
| Net increase | | | 35,353,634 | | | 163,512,960 | |
| | | | | | | | |
Net assets available for benefits | | | | | | | |
| Beginning of year | | | 579,238,102 | | | 415,725,142 | |
| End of year | | $ | 614,591,736 | | $ | 579,238,102 | |
The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
December 31, 2004 and 2003
1. | Description of the Plan |
| | The following description of the IKON Office Solutions, Inc. Retirement Savings Plan (the “Plan”) provides only general information. Participants should refer to the Plan document for a more complete description of the Plan’s provisions. |
| | General |
| | The Plan is a defined contribution plan covering all regular full-time and part-time nonunion employees, as defined by the Plan, of IKON Office Solutions, Inc. (the “Company”) and its domestic subsidiaries which adopt the Plan. |
| | The IKON Office Solutions, Inc. Common Stock Fund is designated as an Employee Stock Ownership Plan (“ESOP”) under the provisions of the Internal Revenue Code. Accordingly, participants are allowed to elect to reinvest dividends in IKON common stock or receive a cash payment. Additionally, any dividends that are reinvested in IKON common stock are fully vested. |
| | The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”). |
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| | Plan Administration |
| | The Plan is administered by the IKON Office Solutions, Inc. Retirement Plans Committee (the “Committee”). State Street Bank and Trust Company is the trustee (the “Trustee”) of the Plan and custodian of the Plan’s assets. The Committee and Trustee of the Plan are appointed by the Board of Directors of the Company. Recordkeeping of the Plan is performed by Hewitt Associates LLC. |
| | Contributions |
| | Each year, participants my contribute up to 16% of their annual base pay plus commissions (“Compensation”), as defined by the Plan, in multiples of 1% except for certain highly compensated participants who may be subject to certain regulatory limitations. Participants may also contribute amounts representing rollovers from other qualified plans. The Company contributes an amount equal to one-half of the first 6% of the Compensation that a participant contributes to the Plan. Prior to July 1, 2004, employees who had attained the age of 55 could redirect matching contributions to, and invest new matching contributions to any of the other available investment options. Effective July 1, 2004, all employees may redirect matching contributions made to their account, regardless of the length of their employment. The Company funds the matching contribution quarterly to participants employed or absent on qualified leave on the last day of the calendar quarter. There is a one-year eligibility waiting period for Company matching contributions for new employees. |
| | |
| | Participant Accounts |
| | Each participant’s account is credited with the participant’s contributions and an allocation of (a) the Company contributions and (b) Plan earnings and charged with an allocation of administrative expenses, if any. Allocations are based on participant compensation or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account. |
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| | Vesting |
| | Participants are immediately vested in their contributions plus actual earnings thereon. Vesting in the Company’s matching portion of their accounts plus actual earnings thereon is based on the following: |
| | Years of service | Vesting | |
| | | | |
| | Less than 2 years | 0 % | |
| | 2 years | 25 % | |
| | 3 years | 50 % | |
| | 4 years | 75 % | |
| | 5 years | 100 % | |
| | Participants are also fully vested in the Company's matching portion upon retirement, position termination due to permanent shutdown of plant or department, total and permanent disability, or death. Pursuant to the ESOP designation, participants are fully vested in dividends on IKON common stock. |
| | |
| | Investment Options |
| | Upon enrollment in the Plan, a participant may direct employee contributions in 1% increments in any of the following 15 investment options. |
| | American Funds Group EuroPacific Growth Fund |
| | Barclay’s Life Path Retirement Fund |
| | Barclay’s Life Path 2010 Fund |
| | Barclay’s Life Path 2020 Fund |
| | Barclay’s Life Path 2030 Fund |
| | Barclay’s Life Path 2040 Fund |
| | Dodge & Cox Balanced Fund |
| | Dodge & Cox Stock Fund |
| | IKON Office Solutions, Inc. Common Stock Fund |
| | INVESCO Stable Value Fund |
| | Laudus Rosenberg US Small Cap Fund |
| | PIMCO Total Return Fund |
| | Vanguard PRIMECAP Fund |
| | Vanguard Institutional Index Fund |
| | Vanguard Strategic Equity Fund |
| | Participant Loans |
| | Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50% of their vested account balance. Loan terms may not exceed five years; however, loan terms may extend up to 15 years for the purchase of a primary residence. Loans are secured by the balance in the participant’s account and bear interest, which is set in the month the loan is made, at the prime lending rate as published in the Wall Street Journal on the last Wednesday of the month plus 1%. Principal and interest are paid ratably through payroll deductions. |
| | Payment of Benefits |
| | Participants are entitled to receive a distribution equal to their vested account balances upon death, retirement, termination, or permanent disability. Participants may elect to receive benefits in either a lump-sum payment, periodic installments limited in duration by the provisions of the Plan, or by the purchase and delivery of a life annuity or qualified joint and survivor annuity contract. Participants under the age of 59-1/2 may make withdrawals from their accounts only from after-tax salary deferral contributions. Participants under the age of 59-1/2 who have participated in the Plan for at least five years may make withdrawals from their accounts derived from employer matching contributions and earnings thereon. Participants under the age of 59-1/2 who have not participated in the Plan for five years may make withdrawals of all or any portion of their vested interest derived from employer matching contributions which have been held by the Plan for at least two full plan years. Any portion of vested assets may be withdrawn by participants in the case of personal financial hardship upon approval of the plan administrator. After reaching age 59-1/2 participants may make withdrawals of any portion of their vested assets at any time without regard to financial hardship. Participants who terminate their employment with a balance of less than $5,000 may receive a direct lump-sum payment or rollover their balance into an eligible retirement plan. Participants under the age of 59-1/2 who terminate their employment with a balance greater than $5,000 may continue to maintain their account within the Plan, receive a direct lump-sum payment, or rollover their balance into an eligible retirement plan. Participants who take withdrawals before reaching age 59-1/2 may be subject to penalties and taxes. |
| | |
| | Forfeitures |
| | During the years ended December 31, 2004 and 2003, $448,845 and $1,029,718, respectively, of employer matching contributions were forfeited by terminated employees before those amounts became vested. Such forfeited amounts were used to reduce employer remittance of employee matching contributions. At December 31, 2004 and 2003, there was $22,599 and $17,850, respectively, of forfeited nonvested amounts. |
| | Plan Expenses |
| | Expenses incurred in connection with the administration of the Plan are paid by the Plan, such as recordkeeping, trustee, administrative, and professional fees. |
| | Reclassification |
| | Certain prior year amounts have been reclassified to conform with the current year presentation. |
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2. | Significant Accounting Policies |
| | Basis of Accounting |
| | The accompanying financial statements have been prepared on the accrual basis of accounting. |
| | Investment Valuation and Income Recognition |
| | The Plan’s investments are stated at fair value. Shares of registered investment companies are valued at net asset value. The Common Stock fund is valued at net unit value which is based upon the quoted market price of common stock and the value of cash and cash equivalents held for liquidity purposes. Participant loans are valued at cost which approximates fair value. Common/collective funds are valued at net unit value as determined by the Trustee. Other investments are valued at net unit value as determined by fund administration. |
| | |
| | Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. |
| | Net appreciation on investments represents the sum of the change in the difference between year-end market value and cost and the difference between the proceeds received and the cost of investments sold. |
| | Payment of Benefits |
| | Benefits are recorded when paid. |
| | |
| | Use of Estimates |
| | The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period. Actual results could differ from those estimates. |
| | |
3. | Investments |
| | The following investments represent 5% or more of the Plan’s net assets: |
| | December 31, 2004 | | | |
| | IKON Office Solutions, Inc. Common Stock (note 4) | $ | 230,492,889 | |
| | INVESCO Stable Value Fund | | 81,599,257 | |
| | Vanguard Institutional Index Fund | | 58,164,422 | |
| | Dodge & Cox Stock Fund | | 41,696,075 | |
| | Vanguard Strategic Equity Fund | | 36,322,319 | |
| | Dodge & Cox Balanced Fund | | 36,035,851 | |
| | Laudus Rosenberg US Small Cap Fund | | 34,040,612 | |
| | American Funds Group Euro Pacific Growth Fund | | 33,641,075 | |
| | | | | |
| | December 31, 2003 | | | |
| | IKON Office Solutions, Inc. Common Stock (note 4) | $ | 280,679,816 | |
| | INVESCO Stable Value Fund | | 81,093,224 | |
| | Vanguard Institutional Index Fund | | 69,520,522 | |
| | During the years ended December 31, 2004 and 2003, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows: |
| | | | 2004 | | | 2003 |
| | | | | | | |
| | Registered investment companies | $ | 21,666,058 | | $ | 36,651,388 |
| | Common stock | | (5,905,008) | | | 117,915,108 |
| | Other investments | | - | | | 3,121,276 |
| | | $ | 15,761,050 | | $ | 157,687,772 |
4. | Nonparticipant-Directed Investments |
| | Employer matching contributions are made in IKON common stock and are invested in the IKON Office Solutions, Inc. Common Stock Fund. Employer matching contributions are nonparticipant directed and may only be redirected to the other available investment options by the participants as described in Note 1. As a result of the Plan amendment, which allows participants to redirect employer matching contributions in any of the other available investment options, the IKON Office Solutions, Inc. Common Stock Fund became participant directed on July 1, 2004. Information about significant components of the changes in net assets of the IKON Office Solutions, Inc. Common Stock Fund, which includes both the nonparticipant directed portion of investments and the participant directed portion of investments, is as follows: |
| | | | 2004 | | 2003 | |
| | | | | | | |
| | Beginning Net Assets | | $ | 283,425,938 | | $ | 192,344,516 | |
| | Changes in net assets | | | | | | | |
| | Net (depreciation) appreciation in fair value | | | | | | | |
| | of investments | | | (5,905,008 | ) | | 117,915,108 | |
| | Dividends | | | 3,391,620 | | | 4,168,684 | |
| | Contributions | | | 27,828,069 | | | 30,695,638 | |
| | Payment of benefits | | | (25,855,752 | ) | | (23,528,485 | ) |
| | Administrative expenses | | | (852,287 | ) | | (1,451,253 | ) |
| | Transfer to other investment options | | | (50,057,456 | ) | | (36,718,270 | ) |
| | Ending Net Assets | | $ | 231,975,124 | | $ | 283,425,938 | |
5. | Related Party Transactions |
| | The Pyramid Directed Account Cash Fund, which was included in various investment options, was managed by Deutsche Bank Trust Company Americas, which served as the Custodian and Trustee of the Plan until June 30, 2003, when it sold its global custody business to State Street Bank Trust Company, the current Custodian and Trustee of the Plan. At December 31, 2004, funds are in the State Street Bank & Trust Company Cash Fund. In addition, the Plan offers an investment in the IKON Office Solutions, Inc. Common Stock fund as an investment option. The transactions in these investments are party-in-interest transactions, which are exempt from prohibited transaction rules. |
| | |
6. | Plan Termination |
| | Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100% vested in their accounts. |
| | |
7. | Differences Between Financial Statements and Form 5500 |
| | The following is a reconciliation of net assets available for benefits per the financial statements to the Plan’s Form 5500: |
| | | | 2004 | | 2003 | |
| | | | | | | |
| | Net assets available for benefits per the | | | | | | | |
| | financial statements | | $ | 614,591,736 | | $ | 579,238,102 | |
| | Amounts allocated to withdrawing participants | | | (1,073,690 | ) | | (1,507,902 | ) |
| | Net assets available for benefits per Form 5500 | | $ | 613,518,046 | | $ | 577,730,200 | |
| | The following is a reconciliation of benefits paid to participants for the year ended December 31, 2004 per the financial statements to the Form 5500: |
| | Benefits paid to participants per the financial statements | | $ | (67,901,781 | ) |
| | Add: Amounts allocated to withdrawing participants | | | | |
| | at December 31, 2004 | | | (1,073,690 | ) |
| | Less: Amounts allocated to withdrawing participants | | | | |
| | at December 31, 2003 | | | 1,507,902 | |
| | Benefits paid to participants per Form 5500 | | $ | (67,467,569 | ) |
| | Amounts allocated to withdrawing participants are recorded on the Plan’s Form 5500 for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. |
| | |
8. | Tax Status |
| | The Internal Revenue Service has determined and informed the Company by a letter dated September 20, 2002, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code (“IRC”). The Plan has been amended since receiving the determination letter as disclosed in Note 1. The Company believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. |
| |
Schedule of Assets (Held at End of Year) | |
Form 5500, Schedule H, Part IV, Line 1 | Schedule I |
December 31, 2004 | EIN# 223739194 |
| | | | | | | Current |
Identity of Issue | | Investment Type | | Cost | | Value |
| | | | | | | |
| IKON Office Solutions, Inc. Common Stock** | | Common Stock | $ | 189,835,425 | $ | 230,492,889 |
| American Funds Group EuroPacific Growth Fund | | Registered Investment Company | | | | 33,641,075 |
| Dodge & Cox Balanced Fund | | Registered Investment Company | | | | 36,035,851 |
| INVESCO Stable Value Fund | | Common Collective Trust | | | | 81,599,257 |
| Dodge & Cox Stock Fund | | Registered Investment Company | | | | 41,696,075 |
| PIMCO Total Return Fund | | Registered Investment Company | | | | 19,429,978 |
| Vanguard Institutional Index Fund | | Registered Investment Company | | | | 58,164,422 |
| Vanguard PRIMECAP Fund | | Registered Investment Company | | | | 10,268,063 |
| Vanguard Strategic Equity Fund | | Registered Investment Company | | | | 36,322,319 |
| Laudus Rosenberg US Small Cap Fund | | Registered Investment Company | | | | 34,040,612 |
| Barclay's Life Path Retirement Fund | | Registered Investment Company | | | | 806,179 |
| Barclay's Life Path 2010 Fund | | Registered Investment Company | | | | 889,857 |
| Barclay's Life Path 2020 Fund | | Registered Investment Company | | | | 1,111,070 |
| Barclay's Life Path 2030 Fund | | Registered Investment Company | | | | 995,572 |
| Barclay's Life Path 2040 Fund | | Registered Investment Company | | | | 522,253 |
| State Street Bank & Trust Company Cash Fund* | | Money Market Fund | | | | 2,506,657 |
| Participant Loans | | Interest rates ranging from 5.0% to | | | | |
| | | 10.5%, maturing between January 1, | | | | |
| | | 2005 and January 1, 2020 | | | | 19,734,530 |
| | | | | | $ | 608,256,659 |
| | | | | | | |
| * | Party-in-interest. |
| | |
| ** | Party-in-interest. Employer contributions included in this fund are nonparticipant directed as employer matching contributions made in IKON common stock. As a result of the Plan amendment, which allows participants to redirect employer matching contributions in any of the other available investment options, the IKON Office Solutions, Inc. Common Stock Fund became participant directed on July 1, 2004. |
| |
Schedule of Reportable Transactions * | |
Form 5500, Schedule H, Line 4j | Schedule II |
December 31, 2004 | EIN# 223739194 |
| | | | | | | | | | | | | | | | |
| | | Description | | Number of | | Number | | Purchase | | Selling | | Cost of | | Net | |
Identity of Parties Involved | | of Assets | | Purchases | | of Sales | | Price | | Price | | Asset | | Gain | |
| | | | | | | | | | | | | | | | |
| IKON Office Solutions, Inc.** | | | Common Stock | | | 7 | | | 109 | | $ | 6,731,246 | | $ | 50,415,838 | | $ | 50,402,305 | | $ | 13,533 | |
| State Street Bank & Trust | | | | | | | | | | | | | | | | | | | | | | |
| Company Cash Fund | | | Money Market Fund | | | 98 | | | 152 | | | 55,065,788 | | | 54,987,798 | | | 54,987,798 | | | - | |
| Vanguard Institutional Index Fund | | | Registered Investment Company | | | 67 | | | 191 | | | 66,985,983 | | | 72,223,434 | | | 72,041,901 | | | 181,533 | |
| Vanguard Windsor II Fund | | | Registered Investment Company | | | 174 | | | 83 | | | 41,006,197 | | | 3,503,628 | | | 3,443,862 | | | 59,766 | |
| PBHG Growth Fund | | | Registered Investment Company | | | 102 | | | 154 | | | 67,413,913 | | | 33,977,273 | | | 33,381,974 | | | 595,299 | |
| Chicago Small Capital Equity Fund | | | Registered Investment Company | | | 159 | | | 97 | | | 61,725,709 | | | 29,215,358 | | | 29,170,235 | | | 45,123 | |
| Vanguard Stable Pooled Fund | | | Other Investment | | | 124 | | | 140 | | | 20,057,793 | | | 19,367,699 | | | 19,367,699 | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | |
* Series of nonparticipant-directed transactions in excess of 5% of the current value of the Plan’s assets as of January 1, 2004 as defined in Section 2520.103-6 of the Department of Labor’s Rules and Regulation for Reporting and Disclosure under ERISA.
** Employer contributions included in this fund are nonparticipant-directed as employer matching contributions are made in IKON common stock. As a result of the Plan amendment, which allows participants to redirect employer matching contributions in any of the other available investment options, the IKON Office Solutions, Inc. Common Stock Fund became participant directed on July 1, 2004.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed by the undersigned thereunto duly authorized.
Date: June 29, 2005 | /s/ ALLISTER H. MCCREE, JR. Allister H. McCree, Jr. Plan Administrator |
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