Ikon Office Solutions (IKN) 8-K IKON ANNOUNCES SECOND QUARTER RESULTS EPS of $0.24 at High End of Improved Outlook

Exhibit 99.1

IKON ANNOUNCES SECOND QUARTER RESULTS
EPS of $0.24 at High End of Improved Outlook

MALVERN, Pa.—April 24, 2008– IKON Office Solutions (NYSE:IKN), the world’s largest independent channel for document management systems and services, today reported results for the second quarter of fiscal 2008, which ended March 31, 2008. For the second quarter, earnings per diluted share were $0.24, at the high end of the Company’s improved outlook of $0.22 to $0.24 per diluted share provided on April 10, 2008. For the second quarter of fiscal 2007, earnings per diluted share were $0.24.

Total revenue for the second quarter of fiscal 2008 was $1.1 billion, a 1 percent increase year over year, including 1.4 points of currency benefit. Total gross profit increased $6 million year over year to $351 million and resulted in a 30 basis point improvement in gross profit margin. Selling and administrative expenses increased $6 million year over year to $299 million, primarily due to higher sales compensation-related expenses and currency, partially offset by lower administrative expenses. Selling and administrative expenses were 28.2 percent of revenue in the second quarter of fiscal 2008 versus 27.9 percent in the second quarter of fiscal 2007.

Operating income for the second quarter of fiscal 2008 was $52 million, or 4.9 percent of revenue, unchanged from the prior-year quarter. Interest expense, net of interest income, increased $7 million year over year to $16 million and weighted average fully diluted shares declined 27 percent to 94 million, primarily due to the Company’s share repurchase-related activity. The Company’s effective tax rate for the second quarter was 36 percent, up from 28 percent in the prior-year quarter. Net income was $22 million in the second quarter of fiscal 2008, compared with $30 million in the prior-year quarter.

“We are gaining traction from the actions we took to improve our financial performance and built momentum through the quarter,” said IKON Chairman and Chief Executive Officer Matthew J. Espe. “Our new IKON U.S. leadership is off to a great start. We generated strong cash flow and we are on track to reduce costs and expenses by $25 million in fiscal 2008 as part of our spending reduction plan announced in January.”

Second Quarter Fiscal 2008 Financial Details
Equipmentrevenue, which includes the sale of copier/printer multifunction products, was $455 million, consistent with the prior-year quarter. Total Equipment revenue was driven primarily by growth in the U.S. color office and color production segments of 1 and 18 percent, respectively; growth in Europe; and a currency benefit of 1.6 points; partially offset by lower revenue in the U.S. black and white office and production segments of 7 and 5 percent, respectively. Gross margin on Equipment increased to 26.6 percent from 25.6 percent due to higher average selling prices and a higher mix of used equipment.

Customer Service and Suppliesrevenue, which includes revenue from the servicing of copier/printer equipment and direct sales of supplies, was $344 million, consistent with the prior-year quarter. This performance reflects growth in Europe and a currency benefit of 1.8 points, offset by lower revenue in North America. Customer Service and Supplies revenue in North America declined primarily due to lower total page volume, a decline in analog copier machines in field (MIF) as expected, and a 1 percent decline in digital copier MIF. Total North American digital copier MIF, including On-site Managed Services, increased 2 percent year over year. Gross margin on Customer Service and Supplies was 40.0 percent in the second quarter of fiscal 2008, compared with 41.3 percent in the second quarter of fiscal 2007, primarily due to cost declines in North America, which did not keep pace with revenue.

Managed and Professional Servicesrevenue was $211 million, up 6 percent year over year. On-site Managed Services revenue, which represents approximately two-thirds of total Managed and Professional Services, increased 7 percent. Professional Services grew 9 percent. Off-site Managed Services increased 3 percent. Gross margin on Managed and Professional Services increased to 28.4 percent from 27.3 percent a year ago, primarily due to strong Professional Services revenue on relatively fixed costs and continued contract profitability growth in On-site Managed Services.

Rental and Feesrevenue of $34 million declined 3 percent from the prior-year quarter, primarily due to lower rental revenue. Gross margin improved to 77.8 percent from 75.5 percent in the prior year.Otherrevenue of $16 million declined from $19 million year over year.

Balance Sheet and Liquidity
During the second quarter, the Company’s cash balance increased $61 million to $203 million. The Company reduced inventory $89 million to $268 million and reduced accounts payable $66 million to $242 million in the quarter.

In the first six months of fiscal 2008, the Company generated $61 million of cash from operations, compared to a use of $11 million in the first half of fiscal 2007. Capital expenditures on operating rentals and property and equipment, net of proceeds, totaled $24 million in the first six months of fiscal 2008, compared with $20 million in the comparable period of fiscal 2007. As a result, free cash flow was $37 million in the first half of fiscal 2008. Free cash flow improved $68 million year over year.

In the second quarter, the Company paid $4 million in dividends to shareholders. In April, IKON’s Board of Directors approved the Company’s regular quarterly cash dividend of $0.04 per common share, payable on June 10, 2008, to holders of record at the close of business on May 19, 2008. At March 31, 2008, actual shares outstanding were 94 million.

During the balance of fiscal 2008, the Company expects to purchase $25 million of its shares as part of its repurchase program. In the near term, the Company expects to repurchase its shares and pay dividends within the covenants of its existing debt agreements and to deploy remaining available cash to reduce debt. In early April, the Company announced the redemption of $50 million of its 2012 Notes. As a result of this partial redemption, the Company expects to incur a $1.7 million pretax loss on the early extinguishment of debt in the third quarter of fiscal 2008.

Outlook
For fiscal 2008, the Company expects its revenue to be flat year over year, its expense-to-revenue ratio to be approximately 28 percent, its operating income margin to be about 5 percent, and its earnings per diluted share to range from $0.92 to $0.98. For the third quarter, the Company expects its earnings per diluted share to range from $0.29 to $0.32. This outlook excludes the $7 million pretax restructuring charge ($0.04 per diluted share) taken in the first quarter of fiscal 2008, any loss from the early extinguishment of debt, and the impact of any future actions the Company may take to improve its business.

For fiscal 2008, the Company anticipates fully diluted weighted average shares to range from 99 to 100 million and free cash flow to range from $80 to $110 million. The Company also anticipates its effective tax rate to approximate 33 percent for fiscal 2008 and be less than 24 percent for the third quarter.

“We are pleased with our execution in the quarter,” said Espe. “We must remain intensely focused on improving sales productivity, driving placement of color machines, growing our annuity streams, improving working capital and reducing costs and expenses.”

Conference Call, Webcast and Replays—Note Updated Dial-in Number
IKON will host a conference call and webcast at 10:00 a.m. EDT on Thursday, April 24, 2008 to discuss its results for the second quarter of fiscal 2008. The live audio broadcast of the call, with slides, can be accessed on IKON’s Investor Relations homepage or by calling (877) 869-3847 (updated).

A complete replay of the conference call will also be available on IKON’s Investor Relations homepage approximately two hours after the call ends. To listen, please visit www.ikon.com and click on Investor Relations and then Calendar & Presentations.

Beginning at approximately 12:00 p.m. EDT on April 24, 2008, and ending at midnight EDT on April 28, 2008, a complete replay of the conference call can also be accessed via telephone by calling (877) 660-6853 or (201) 612-7415 and entering account number 270 and conference number 280810.

2008 Investor Conference
IKON will hold its annual conference for investors and analysts in New York on May 14, 2008. Registration will begin at 1:30 p.m. EDT followed by management presentations beginning at 2:00 p.m. EDT. For additional information, please contact Jim Jacobson, Director of Investor Relations, atjamjacobson@ikon.com.

About IKON
IKON Office Solutions, Inc. (www.ikon.com) is the world’s largest independent channel for document management systems and services, enabling customers to improve document workflow and increase efficiency. IKON integrates best-in-class copiers, printers and MFP technologies from leading manufacturers, such as Canon, Ricoh, Konica Minolta and HP, and document management software and systems from companies like Captaris, Kofax, EFI, eCopy and others, to deliver tailored, high-value solutions implemented and supported by its global services organization – IKON Enterprise Services. With fiscal year 2007 revenue of $4.2 billion, IKON has approximately 25,000 employees in over 400 locations throughout North America and Western Europe.

This news release includes information that may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements relating to our expected third quarter and full fiscal year 2008 results from operations, revenues, cost and expense reductions, margins, tax rate, cash flow, and our strategic priorities, including: growth objectives; operational leverage; and capital strategy initiatives including share repurchases and debt reduction. Although IKON believes the expectations contained in such forward-looking statements are reasonable, it can give no assurances that such expectations will prove correct. Such forward-looking statements are based upon management’s current plans or expectations and are subject to a number of risks and uncertainties set forth in our filings with the U.S. Securities and Exchange Commission. As a consequence of these and other risks and uncertainties, IKON’s current plans, anticipated actions and future financial condition, results may differ materially from those expressed in any forward-looking statements.

The Company has reported its financial results in accordance with generally accepted accounting principles (GAAP). In addition, this news release contains certain non-GAAP financial measures, free cash flow and non-GAAP EPS.  

Free cash flow is defined as cash from operations less expenditures for property and equipment, less expenditures for equipment on operating leases, plus proceeds from the sale of property and equipment and equipment on operating leases.  IKON believes free cash flow is useful because it provides insight into the amount of cash that the Company has available for discretionary uses, after expenditures for capital commitments.

Non-GAAP EPS as used in this presentation, excludes the restructuring charge incurred in the first quarter of fiscal 2008, any loss from the early extinguishment of debt, and the impact of any future actions the Company may take to improve its business. IKON believes this measure provides investors with a useful indication of the performance of IKON’s ongoing operations and financial position.

The reader is encouraged to evaluate these non-GAAP financial measures and the reasons IKON considers them useful for supplemental analysis.

IKON Office Solutions^® and IKON: Document Efficiency at Work^® are trademarks of IKON Office Solutions, Inc. All other trademarks are the property of their respective owners.

(FIKN)
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IKON OFFICE SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
	March 31,		September		30,
	2008		2007
Assets
Cash and cash equivalents	$	203,042	$	349,237
Accounts receivable, net		577,046		552,716
Lease receivables, net		81,391		84,207
Inventories		268,213		287,503
Prepaid expenses and other current assets		30,490		35,085
Income taxes receivable		4,104		—
Deferred taxes		48,028		48,167
Total current assets		1,212,314		1,356,915
Long-term lease receivables, net		252,795		251,776
Equipment on operating leases, net		62,317		72,052
Property and equipment, net		150,667		154,218
Deferred taxes		30,015		18,144
Goodwill		1,334,523		1,333,249
Other assets		93,737		84,354
Total Assets	$	3,136,368	$	3,270,708
Liabilities
Current portion of corporate debt	$	17,248	$	16,798
Current portion of non-corporate debt		59,989		51,077
Trade accounts payable		241,752		263,657
Accrued salaries, wages and commissions		85,724		93,052
Deferred revenues		112,596		109,796
Income taxes payable		—		15,240
Other accrued expenses		136,358		129,323
Total current liabilities		653,667		678,943
Long-term corporate debt		724,154		576,199
Long-term non-corporate debt		180,036		181,334
Other long-term liabilities		160,033		128,211
Total Shareholders’ Equity		1,418,478		1,706,021
Total Liabilities and Shareholders’ Equity	$	3,136,368	$	3,270,708

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IKON Office Solutions, Inc.
Income Statement and Operational Analysis (in thousands, except earnings per share)
(unaudited)
	Three Months Ended March 31,
	2008			2007
Revenues
Equipment	$ 454,640			$453,686
Customer service and supplies		344,347			345,267
Managed and professional services		211,057			198,237
Rental and fees		33,521			34,576
Other		15,635			18,970
		1,059,200			1,050,736
Cost of Revenues
Equipment		333,541			337,709
Customer service and supplies		206,658			202,691
Managed and professional services		151,134			144,211
Rental and fees		7,435			8,486
Other		9,873			12,630
		708,641			705,727
Gross Profit
Equipment		121,099			115,977
Customer service and supplies		137,689			142,576
Managed and professional services		59,923			54,026
Rental and fees		26,086			26,090
Other		5,762			6,340
		350,559			345,009
Selling and administrative		299,060			293,280
Restructuring benefit		71			-
Operating income		51,570			51,729
Interest income		880			3,039
Interest expense		17,041			12,530
Income before taxes on income		35,409			42,238
Taxes on income		12,920			11,785
Net income	$ 22,489			$30,453
Basic Earnings Per Common Share	$ 0.24			$ 0.24
Diluted Earnings Per Common Share	$ 0.24			$ 0.24
Cash dividends Per Common Share	$ 0.04			$ 0.04
Weighted Average Common Shares Outstanding, Basic		93,871			126,329
Weighted Average Common Shares Outstanding, Diluted		93,977			128,182
Operational Analysis:
Gross profit %, equipment		26.6	%		25.6	%
Gross profit %, customer service and supplies		40.0	%		41.3	%
Gross profit %, managed and professional services		28.4	%		27.3	%
Gross profit %, rental and fees		77.8	%		75.5	%
Gross profit %, other		36.9	%		33.4	%
Total gross profit %		33.1	%		32.8	%
Selling and administrative as a % of revenue		28.2	%		27.9	%
Operating income as a % of revenue		4.9	%		4.9	%

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IKON Office Solutions, Inc.
Income Statement and Operational Analysis (in thousands, except earnings per share)
(unaudited)
	Six Months Ended March 31,
	2008			2007
Revenues
Equipment	$ 847,283			$869,923
Customer service and supplies		694,568			691,237
Managed and professional services		416,932			390,480
Rental and fees		64,484			69,984
Other		33,988			36,996
		2,057,255			2,058,620
Cost of Revenues
Equipment		624,485			650,093
Customer service and supplies		404,748			396,921
Managed and professional services		300,288			286,463
Rental and fees		15,133			18,395
Other		22,147			24,627
		1,366,801			1,376,499
Gross Profit
Equipment		222,798			219,830
Customer service and supplies		289,820			294,316
Managed and professional services		116,644			104,017
Rental and fees		49,351			51,589
Other		11,841			12,369
		690,454			682,121
Selling and administrative		594,489			581,417
Restructuring charge		6,612			-
Operating income		89,353			100,704
Interest income		3,281			6,399
Interest expense		30,277			24,982
Income before taxes on income		62,357			82,121
Taxes on income		24,895			24,331
Net income	$ 37,462			$57,790
Basic Earnings Per Common Share	$ 0.36			$ 0.46
Diluted Earnings Per Common Share	$ 0.36			$ 0.45
Cash dividends Per Common Share	$ 0.08			$ 0.08
Weighted Average Common Shares Outstanding, Basic		103,717			126,787
Weighted Average Common Shares Outstanding, Diluted		104,334			128,747
Operational Analysis:
Gross profit %, equipment		26.3	%		25.3	%
Gross profit %, customer service and supplies		41.7	%		42.6	%
Gross profit %, managed and professional services		28.0	%		26.6	%
Gross profit %, rental and fees		76.5	%		73.7	%
Gross profit %, other		34.8	%		33.4	%
Total gross profit %		33.6	%		33.1	%
Selling and administrative as a % of revenue		28.9	%		28.2	%
Operating income as a % of revenue		4.3	%		4.9	%

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IKON Office Solutions, Inc.
Consolidated Statements of Cash Flows				Six Months Ended March 31,
(in thousands and unaudited)				2008				2007
Cash Flows from Operating Activities
	Net income			$	37,462			$	57,790
	Additions (deductions) to reconcile net income to net cash provided by (used in) operating activities:
		Depreciation			36,796				33,862
		Amortization			517				352
		Other non-cash items			1,645				675
		Loss on disposal of property and equipment			200				503
		Provision for losses on accounts and lease receivables			3,842				3,891
		Restructuring charge			6,612				-
		Provision for deferred income taxes			9,002				7,256
		Stock-based compensation expense			5,574				4,980
		Excess tax benefits from stock-based payments arrangements			(215	)			(1,466	)
		Pension expense			2,099				1,029
		Changes in operating assets and liabilities:
			(Increase) decrease in accounts receivable		(29,550	)			22,261
			Decrease (increase) in inventories		19,184				(109,434	)
			Decrease in prepaid expenses and other current assets		121				4,646
			(Decrease) increase in accounts payable		(22,334	)			30,606
			Increase (decrease) in deferred revenue		1,975				(10,584	)
			Decrease in accrued expenses		(12,298	)			(49,671	)
			Contributions to pension plans		(1,926	)			(1,936	)
			Increase (decrease) in taxes payable		2,535				(6,280	)
		Other			-				48
					-		-		—
		Net cash provided by (used in) operating activities			61,241				(11,472	)
Cash Flows from Investing Activities
Expenditures for property and equipment					(17,710	)			(11,708	)
Expenditures for equipment on operating leases					(11,886	)			(12,731	)
Proceeds from the sale of property and equipment and equipment on operating leases					5,679				4,928
Proceeds from the sale of lease receivables					97,752				106,964
Lease receivables — additions					(150,443	)			(152,026	)
Lease receivables — collections					50,721				49,311
Proceeds from life insurance					1,977				3,805
Other					(3,467	)			(868	)
							-
		Net cash used in investing activities			(27,377	)			(12,325	)
							-
Cash Flows from Financing Activities
Short-term corporate debt borrowings, net					-				1
Repayment of other borrowings					(5,790	)			(42	)
Debt issuance costs					(3,915	)			-
Debt modification costs					-				(15,750	)
Corporate debt — issuances					151,780				-
Corporate debt — repayments					(5,933	)			(615	)
Non-corporate debt — issuances					18,714				4,220
Non-corporate debt — repayments					(9,849	)			(7,175	)
Dividends paid					(8,386	)			(10,135	)
Proceeds from stock option exercises					1,368				15,244
Excess tax benefits from stock-based payments arrangements					215				1,466
Purchase of treasury shares					(316,962	)			(56,115	)
							-
		Net cash used in financing activities			(178,758	)			(68,901	)
							-
Effect of exchange rate changes on cash and cash equivalents					(1,301	)			2,111
							-
Net decrease in cash and cash equivalents				$	(146,195	)		$	(90,587	)
Cash and cash equivalents at beginning of year					349,237				414,239
							-
Cash and cash equivalents at end of period				$	203,042			$	323,652
							-
Non-cash investing and financing activities:
Assets acquired under capital leases				$	1,925			$	5,998
							-

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