Exhibit 99
IKON OFFICE SOLUTIONS ANNOUNCES
THIRD QUARTER RESULTS
Earnings Exceed Expectations;
Company Continues Focus on Cash Flow and Profitability
Valley Forge, Pennsylvania - July 26, 2001 - IKON Office Solutions (NYSE:IKN)
today announced net income of $26 million, or earnings per share of $.18, for
the third fiscal quarter ended June 30, 2001, exceeding the Company's
expectations for the quarter. For the same period in 2000, earnings were $.19
per share, excluding one-time gains from early extinguishment of debt and the
sale of investments totaling $.02 per share. Revenues for the quarter were $1.31
billion, compared to $1.40 billion for the same period in 2000.
Free cash flow for the third quarter was approximately $80 million compared to
approximately $40 million for the same period in 2000. Based on the Company's
latest analysis, free cash flow for the full year should exceed the previously
communicated expectation of $170-$185 million.
"Due to continued improvements in gross margin and our ability to control
Selling and Administrative expenses without foregoing our strategic investments,
we were able to deliver strong earnings for the quarter," said James J. Forese,
Chairman and Chief Executive Officer of IKON Office Solutions. "Revenues
declined 6% from the prior year, or 5% excluding the impact of foreign currency
translation, largely due to growing economic concerns and continued competitive
pressure. Understanding these challenges in the quarter, we were increasingly
focused on sales discipline - specifically, improved equipment contribution, the
continued penetration of growth markets such as the production and outsourcing
sectors, and the delivery of higher value-added solutions to our customers.
Equipment aftermarket, namely supply sales and equipment service, also delivered
strong productivity. As a result, we were able to enhance profitability for the
quarter despite lower revenues.
"During the quarter, we continued to execute in areas critical to our long-term
strategy. Specifically, we generated strong growth in the production arena
through sales of our higher-end, segments 5 and 6 copier/printer equipment, and
facilities management generated double-digit growth for the sixth consecutive
quarter," continued Mr. Forese.
Net Sales, which include the sale of copier/printer equipment, supplies, and
technology hardware, declined 11% from the prior year largely due to the decline
in technology hardware and copier/printer equipment sales. Technology hardware,
such as computers, routers and servers sold by the various technology divisions,
declined as the Company continued to shift emphasis away from these low margin
products. Sales of copier/printer equipment declined in response to ongoing
economic and competitive pressures as well as the Company's strategic focus on
moving from low-end, lower margin products to high-end, higher margin products.
The Company continued to post year-over-year growth in sales of higher-end
products, specifically segments 5 and 6 black & white production equipment and
production color. Gross profit margin on Net Sales increased substantially over
the same period in 2000 as the Company focused on cost controls and as it
realized the benefits of earlier productivity programs. Adding to the gross
margin expansion was the ongoing benefit of less low margin technology hardware
revenues in the current Net Sales revenue mix.
Service & Rentals, which include revenues from the servicing of copier/printer
equipment, outsourcing, technology services, and rentals, declined 2% from the
prior year. While outsourcing continued to record year over year growth,
revenues from the servicing of copier/printer equipment as well as technology
services declined from the prior year. Service & Rentals gross profit margin
increased from the prior year due to improvements in productivity associated
with the servicing of copier/printer equipment.
Finance Income grew 5.1% from the prior year. Gross profit margin on Finance
Income improved from the prior year primarily due to increased average corporate
borrowings on behalf of the finance subsidiaries. Interest on corporate
borrowings is reflected as Interest Expense while interest on finance
subsidiaries' borrowings is reflected as Finance Interest Expense.
Operating Margins of 4.9% were comparable to the prior year largely due to
stronger gross margins and controlled Selling and Administrative costs as the
Company continues to balance investments necessary for market differentiation
and leadership against cost savings achieved through ongoing productivity
programs. Since the beginning of its fiscal year, the Company has reduced
headcount by approximately 1,500 as part of these productivity initiatives.
Outlook:
Earnings per share for the full year, excluding special items, are expected to
be $.55, as previously communicated. The Company expects that economic and
competitive pressures will continue to impact the last quarter of fiscal 2001,
along with normal seasonal influences typical within the industry. Free cash
flow for fiscal 2001 is expected to exceed $200 million.
"IKON has made strong progress in becoming an integrated provider of business
communication solutions. We have realigned our sales and service organizations
to focus on new technologies and market opportunities, and we continue to
improve our operational infrastructure to ensure we have a profitable and
customer-focused business model," concluded Mr. Forese. "We will continue to
execute on this strategy while responding to the additional challenges of an
uncertain economic environment by remaining focused on our cost structures, cash
flow, and profitability."
================================================================================
Additional information regarding the third quarter results and the Company's
outlook for next quarter and the full fiscal year will be discussed on a
conference call hosted by IKON at 10:00 a.m. EST on Thursday, July 26, 2001.
Please call (719) 457-2645 to participate. A complete replay of the conference
call will be available over the Internet on IKON's Investor Relations home
page approximately two hours after the call ends. To listen, please go to
www.ikon.com and click on Invest in IKON. Beginning at 1:00PM EST on July 26,
2001 and ending at midnight on July 30, 2001, a complete replay of the
conference call can also be accessed via telephone by calling (719) 457-0820
and using the access code 766184.
================================================================================
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 800 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 the Company's outlook for the fourth quarter and the full fiscal year and the
Company's long-term investments and growth. 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. Exhibit 99
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
Third Quarter Fiscal
---------------------------------------------
2001 2000 % Change
--------------------- ------------------ ----------
Revenues
Net sales $ 641,858 $ 720,066 (10.9)%
Service and rentals 571,662 583,524 (2.0)
Finance income 97,637 92,922 5.1
- ------------------------------------------------------------------------------------------------------------------
1,311,157 1,396,512 (6.1)
- ------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 409,861 482,916
Service and rental costs 337,855 349,438
Finance interest expense 41,783 43,889
Selling and administrative 456,880 451,797
- ------------------------------------------------------------------------------------------------------------------
1,246,379 1,328,040
- ------------------------------------------------------------------------------------------------------------------
Operating income 64,778 68,472
Gain on sale of investment 3,288
Interest expense 18,345 18,314
- ------------------------------------------------------------------------------------------------------------------
Income before income taxes and extraordinary gain 46,433 53,446
Income taxes 20,431 23,525
- ------------------------------------------------------------------------------------------------------------------
Income before extraordinary gain 26,002 29,921
Extraordinary gain from early extinguishment of debt, net
of income taxes of $1,342 1,707
- ------------------------------------------------------------------------------------------------------------------
Net income $ 26,002 $ 31,628
- ------------------------------------------------------------------------------------------------------------------
Basic and Diluted Earnings Per Common Share $0.18 $0.21
===================== ==================
Weighted Average Common Shares Outstanding, Basic 141,546 148,922
===================== ==================
Weighted Average Common Shares Outstanding, Diluted 145,431 148,941
===================== ==================
Operations Analysis:
Gross profit %, net sales 36.1% 32.9%
Gross profit %, service and rentals 40.9% 40.1%
Gross profit %, finance subsidiaries 57.2% 52.8%
Total gross profit % 39.8% 37.3%
Selling and administrative as a % of revenue 34.8% 32.4%
Operating income as a % of revenue 4.9% 4.9%
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Excluding Special Items
Third Quarter Fiscal
--------------------------------------------
2001 2000 * % Change
-------------------- ------------------ ---------------------
Revenues
Net sales $ 641,858 $ 720,066 (10.9)%
Service and rentals 571,662 583,524 (2.0)
Finance income 97,637 92,922 5.1
- -------------------------------------------------------------------------------------------------
1,311,157 1,396,512 (6.1)
- -------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 409,861 482,916
Service and rental costs 337,855 349,438
Finance interest expense 41,783 43,889
Selling and administrative 456,880 451,797
- -------------------------------------------------------------------------------------------------
1,246,379 1,328,040
- -------------------------------------------------------------------------------------------------
Operating income 64,778 68,472
Interest expense 18,345 18,314
- -------------------------------------------------------------------------------------------------
Income before income taxes 46,433 50,158
Income taxes 20,431 22,078
- -------------------------------------------------------------------------------------------------
Net income $ 26,002 $ 28,080
==================== ==================
Basic and Diluted Earnings Per Common Share $0.18 $0.19
==================== ==================
Weighted Average Common Shares Outstanding, Basic 141,546 148,922
==================== ==================
Weighted Average Common Shares Outstanding, Diluted 145,431 148,941
==================== ==================
Operations Analysis:
Gross profit %, net sales 36.1% 32.9%
Gross profit %, service and rentals 40.9% 40.1%
Gross profit %, finance subsidiaries 57.2% 52.8%
Total gross profit % 39.8% 37.3%
Selling and administrative as a % of revenue 34.8% 32.4%
Operating income as a % of revenue 4.9% 4.9%
* Third quarter fiscal 2000 excludes $3,288 gain on sale of investment and
$3,049 extraordinary gain on early extinguishment of debt ($1,707
after-tax).
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Year to Date Fiscal
----------------------------------------------
2001 2000 % Change
---------------------- ------------------ ---------
Revenues
Net sales $ 2,001,648 $ 2,080,636 (3.8)%
Service and rentals 1,703,795 1,737,774 (2.0)
Finance income 284,991 255,089 11.7
- -------------------------------------------------------------------------------------------------------------
3,990,434 4,073,499 (2.0)
- -------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,305,473 1,382,241
Service and rental costs 1,028,800 1,048,707
Finance interest expense 132,350 122,849
Selling and administrative 1,364,391 1,314,579
Restructuring and asset impairment charge 105,340
- -------------------------------------------------------------------------------------------------------------
3,831,014 3,973,716
- -------------------------------------------------------------------------------------------------------------
Operating income 159,420 99,783
Gain on sale of investment 3,288
Interest expense 54,222 51,934
- -------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes
and extraordinary gain 105,198 51,137
Income taxes 46,287 41,999
- -------------------------------------------------------------------------------------------------------------
Income from continuing operations before extraordinary gain 58,911 9,138
Discontinued operations, net of income taxes of $942 1,200
Extraordinary gain from early extinguishment of debt, net
of income taxes of $1,342 1,707
- -------------------------------------------------------------------------------------------------------------
Net income $ 60,111 $ 10,845
====================== ==================
Basic and Diluted Earnings Per Common Share
Continuing operations $0.41 $0.06
Discontinued operations 0.01
Extraordinary gain 0.01
---------------------- ------------------
Net income $0.42 $0.07
====================== ==================
Weighted Average Common Shares Outstanding, Basic 142,121 149,158
====================== ==================
Weighted Average Common Shares Outstanding, Diluted 143,982 149,317
====================== ==================
Operations Analysis:
Gross profit %, net sales 34.8% 33.6%
Gross profit %, service and rentals 39.6% 39.7%
Gross profit %, finance subsidiaries 53.6% 51.8%
Total gross profit % 38.2% 37.3%
Selling and administrative as a % of revenue 34.2% 32.3%
Operating income as a % of revenue 4.0% 2.4%
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Excluding Special Items
Year to Date Fiscal
2001 * 2000 ** % Change
-------------------- ----------------- --------------------
Revenues
Net sales $ 2,001,648 $ 2,080,636 (3.8)%
Service and rentals 1,703,795 1,737,774 (2.0)
Finance income 284,991 255,089 11.7
- ----------------------------------------------------------------------------------------------------
3,990,434 4,073,499 (2.0)
- ----------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,305,473 1,382,241
Service and rental costs 1,028,800 1,048,707
Finance interest expense 132,350 122,849
Selling and administrative 1,364,391 1,331,579
- ----------------------------------------------------------------------------------------------------
3,831,014 3,885,376
- ----------------------------------------------------------------------------------------------------
Operating income 159,420 188,123
Interest expense 54,222 51,934
- ----------------------------------------------------------------------------------------------------
Income before income taxes 105,198 136,189
Income taxes 46,287 59,923
- ----------------------------------------------------------------------------------------------------
Net income $ 58,911 $ 76,266
==================== =================
Basic and Diluted Earnings Per Common Share $0.41 $0.51
==================== =================
Weighted Average Common Shares Outstanding, Basic 142,121 149,158
==================== =================
Weighted Average Common Shares Outstanding, Diluted 143,982 149,317
==================== =================
Operations Analysis:
Gross profit %, net sales 34.8% 33.6%
Gross profit %, service and rentals 39.6% 39.7%
Gross profit %, finance subsidiaries 53.6% 51.8%
Total gross profit % 38.2% 37.3%
Selling and administrative as a % of revenue 34.2% 32.7%
Operating income as a % of revenue 4.0% 4.6%
* Fiscal 2001 excludes a gain from discontinued operations of $2,142 ($1,200
after-tax).
** Fiscal 2000 excludes $17,000 of insurance proceeds related to the
shareholder litigation settlement, $105,340 restructuring and asset
impairment charge, $3,288 gain on sale of investment, and $3,049
extraordinary gain on early extinguishment of debt ($1,707 after-tax).