Exhibit 99
Contacts:
Veronica L. Rosa Steven K. Eck
Investor Relations Media Relations
610-408-7196 610-408-7295
vrosa@ikon.com seck@ikon.com
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IKON OFFICE SOLUTIONS ANNOUNCES
FIRST QUARTER RESULTS
Delivers Earnings Per Share of $.12
Valley Forge, Pennsylvania - January 25, 2001 - IKON Office Solutions (NYSE:
IKN) today announced results for the first fiscal quarter ended December 31,
2000. Earnings for the first quarter were $17.4 million, or $.12 per share.
Before a gain from discontinued operations of $.01 per share, earnings were
$16.2 million, or $.11 per share.
"We are pleased with our earnings results for the quarter. IKON has delivered
earnings that were within our stated goal for the quarter, at a time when many
in our industry are encountering a number of strategic and financial issues,"
stated James J. Forese, Chairman and Chief Executive Officer. "More importantly,
our results reflect a number of positive signals, such as continued growth in
sales of copiers and printer equipment, growth in outsourcing, and strong growth
and productivity in our equipment service aftermarket. We believe these are some
of the catalysts needed to support expanded revenue growth and operating
margins, as well as continued strong cash flows long-term."
Revenues for the first quarter of both fiscal 2001 and 2000 were $1.32 billion.
Without the negative effect of foreign currency, revenue growth for the first
quarter of fiscal 2001 compared to the prior year would have been 1.5%.
"We continued to advance in critical areas of our business. Specifically, sales
of copier and printer equipment grew 6% from the prior year worldwide and our
facilities management business again delivered double digit growth. Given
today's competitive environment and the obvious signs of a slowdown in the U.S.
economy, we are encouraged by these results. Revenue growth in key areas of our
business was offset by our de-emphasis on revenues associated with our
low-margin technology hardware sales and certain non-strategic service
offerings, as we continue to prioritize revenues associated with long-term
profitability and strategic value," Forese said.
Revenues from Net Sales, consisting of copier and printer equipment revenues,
technology related hardware, and supplies, grew .5% in the quarter compared to
last year, as declines in supplies and technology hardware revenues offset
continued strong growth in equipment sales. In IKON North America, copier and
printer equipment sales grew 7%, while in Europe these revenues grew 9% in local
currency. Gross margin on Net Sales strengthened slightly from the prior year
due to a change in the revenue mix.
Service & Rentals revenues, which include equipment service revenues,
outsourcing, and technology service revenues, declined 2.3% from the prior year.
Growth in outsourcing revenues was offset by a decline in technology and
equipment service revenues. While equipment service revenues were down from the
first quarter of last year, equipment service productivity was up by 10%,
strengthening equipment service gross margins. Service & Rentals gross margin
experienced a decline in comparison to the prior year primarily due to equipment
service comprising a lower percentage of the overall revenue mix. On a
sequential basis, the first quarter's equipment service revenues were 3% higher
than those reported in the fourth quarter of fiscal 2000 - reflecting the
aftermarket growth opportunity associated with the Company's growing equipment
base in the digital and higher-end market.
Finance Income grew 15.1% due to continued growth of the Company's leasing
portfolio. During the quarter, over 70% of the Company's copier and printer
equipment revenues were financed through IOS Capital, the Company's captive
finance subsidiary. Gross margin on Finance Income declined slightly due to
higher interest costs not yet reflected in customer lease rates.
Selling and Administrative expense increased as a percentage of revenues due
primarily to higher selling costs associated with the build up of the Company's
sales force targeted at key growth areas. The increase also reflects the
investments IKON is making as part of its strategy to develop differentiated
services that will enhance productivity and customer satisfaction, including
Digital Express(R) 2000, its Web based e-procurement offering, as well as its
comprehensive e-commerce strategy.
Near Term Outlook
"We are confident that our progress to date will allow us to take advantage of
the many opportunities we see before us," stated Forese. "However, we are
naturally cautious regarding the competitive and economic environment. As a
result, we are already taking actions to improve our ability to respond to these
challenges. For our second quarter, we believe our earnings will show flat to
slight improvement from the first quarter. However, on a year-to-year comparison
they should be lower as we continue to focus on long-term investments and
competitive opportunities."
Forese concluded, "IKON continues to be a significant player in this industry
and we are in a great position to capture a number of opportunities."
IKON Office Solutions (www.ikon.com) is one of the world's leading providers of
products and services that help businesses communicate. IKON provides customers
with total business solutions for every office, production and outsourcing need,
including copiers and printers, color solutions, distributed printing,
facilities management, imaging and legal outsourcing solutions, as well as
network design and consulting, e-business development, telecommunications
services and technology training. With fiscal 2000 revenues of $5.4 billion,
IKON has approximately 900 locations worldwide including the United States,
Canada, Mexico, the United Kingdom, France, Germany, Ireland, and Denmark.
This news release includes information which 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 expected earnings and opportunities in the competitive environment. 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, including,
but not limited to: risks and uncertainties relating to conducting operations in
a competitive environment and a changing industry; delays, difficulties,
management transitions and employment issues associated with consolidation of,
and/or changes in business operations; managing the integration of existing and
acquired companies; risks and uncertainties associated with existing or future
vendor relationships; and general economic conditions. As a consequence of these
and other risks and uncertainties, IKON's current plans, anticipated actions and
future financial condition and results may differ materially from those
expressed in any forward-looking statements. Certain additional risks and
uncertainties are set forth in IKON's 2000 Annual Report on Form 10-K/A filed
with the Securities and Exchange Commission.
# # #
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
First Quarter Fiscal
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2001 2000 % Change
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Revenues
Net sales $ 655,071 $ 652,103 0.5 %
Service and rentals 569,613 582,921 (2.3)
Finance income 93,367 81,097 15.1
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1,318,051 1,316,121 0.1
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Costs and Expenses
Cost of goods sold 434,993 434,713 0.1
Service and rental costs 342,054 345,438 (1.0)
Finance interest expense 46,204 39,452 17.1
Selling and administrative 449,155 438,223 2.5
Restructuring and asset impairment charge 105,340
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1,272,406 1,363,166 (6.7)
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Operating income (loss) 45,645 (47,045)
Interest expense 16,754 15,994 4.8
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Income (loss) from continuing operations before income taxes (benefit) 28,891 (63,039)
Income taxes (benefit) 12,712 (7,403)
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Income (loss) from continuing operations 16,179 (55,636)
Discontinued operations, net of income taxes 1,200
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Net income (loss) $ 17,379 $ (55,636)
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Basic and Diluted Earnings (Loss) Per Common Share
Continuing operations $0.11 ($0.37)
Discontinued operations 0.01
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Net income (loss) $0.12 ($0.37)
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Weighted Average Common Shares Outstanding, Basic 142,789 149,279
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Weighted Average Common Shares Outstanding, Diluted 142,883 149,279
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Operations Analysis:
Gross profit %, net sales 33.6% 33.3%
Gross profit %, service and rentals 39.9% 40.7%
Gross profit %, finance subsidiaries 50.5% 51.4%
Total gross profit % 37.5% 37.7%
Selling and administrative as a % of revenue 34.1% 33.3%
Operating income as a % of revenue 3.5% NA
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
EXCLUDING SPECIAL ITEMS
First Quarter Fiscal
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2001* 2000** % Change
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Revenues
Net sales $ 655,071 $ 652,103 0.5 %
Service and rentals 569,613 582,921 (2.3)
Finance income 93,367 81,097 15.1
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1,318,051 1,316,121 0.1
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Costs and Expenses
Cost of goods sold 434,993 434,713 0.1
Service and rental costs 342,054 345,438 (1.0)
Finance interest expense 46,204 39,452 17.1
Selling and administrative 449,155 438,223 2.5
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1,272,406 1,257,826 1.2
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Operating income 45,645 58,295 (21.7)
Interest expense 16,754 15,994 4.8
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Income before income taxes 28,891 42,301 (31.7)
Income taxes 12,712 19,458 (34.7)
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Net income $ 16,179 $ 22,843 (29.2)
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Basic and Diluted Earnings Per Common Share $0.11 $0.15
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Weighted Average Common Shares Outstanding, Basic 142,789 149,279
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Weighted Average Common Shares Outstanding, Diluted 142,883 149,443 ***
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Operations Analysis:
Gross profit %, net sales 33.6% 33.3%
Gross profit %, service and rentals 39.9% 40.7%
Gross profit %, finance subsidiaries 50.5% 51.4%
Total gross profit % 37.5% 37.7%
Selling and administrative as a % of revenue 34.1% 33.3%
Operating income as a % of revenue 3.5% 4.4%
* First quarter fiscal 2001 excludes a gain from discontinued operations of
$2,142 ($1,200 after-tax).
** First quarter fiscal 2000 excludes a restructuring and asset impairment
charge of $105,340.
*** As a result of exclusion, shares that were previously excluded because
of a net loss are now included in the diluted earnings per share
calculation.
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.