Exhibit 99
IKON OFFICE SOLUTIONS ANNOUNCES
FISCAL YEAR AND FOURTH QUARTER RESULTS
Delivers Fourth Quarter Operational Earnings Per Diluted Share of $.12
Free Cash Flow Significantly Exceeds Target for Year
Valley Forge, Pennsylvania - October 25, 2001 - IKON Office Solutions
(NYSE:IKN), a leading provider of business communications solutions, today
reported results for its fiscal year and fourth quarter ended September 30,
2001.
Fiscal 2001 Results
For the full fiscal year, net income was $18.5 million or $.13 per diluted
share, compared to net income of $29.1 million or $.20 per diluted share in the
prior year. Revenues for Fiscal 2001 totaled $5.27 billion, a decline of 3.2%
from the prior year. Excluding special charges and gains, net income for Fiscal
2001 was $76.5 million or $.53 per diluted share, compared to net income of
$93.1 million or $.63 per diluted share for Fiscal 2000.
The Company generated $295 million in free cash flow in Fiscal 2001, surpassing
its original target and reflecting the benefits of improved working capital
productivity, including better Days Sales Outstanding (DSOs) and inventory
turns, as well as other cash management initiatives.
"Fiscal 2001 was a year of steady progress and strategic execution for IKON,"
said James J. Forese, Chairman and Chief Executive Officer, IKON Office
Solutions. "We continued to streamline our infrastructure to enhance long-term
profitability, as we repositioned our revenue mix toward key growth areas and
more profitable businesses. Our balance sheet remains strong with excellent cash
flow, which allows us to continue to fund key areas of our business and to take
advantage of future opportunities.
"The rapid rate of deterioration in the economic climate in Fiscal 2001,
especially in the second half of our fiscal year, was the biggest challenge
facing IKON this year," Mr. Forese continued. "Our ongoing focus on operational
improvement clearly helped us balance the tough challenges we faced throughout
Fiscal 2001, and we expect these disciplines to benefit us going forward as we
prepare for an equally challenging environment in Fiscal 2002. Already, we are
implementing a series of aggressive actions to deliver permanent cost savings
with the restructuring actions announced during the fourth quarter, and our
plans for further headcount reductions for Fiscal 2002. We are taking tough and
appropriate actions that complement our long-term strategy, and I am confident
of IKON's future and the opportunities that lie ahead."
Fourth Quarter Results
Earnings for the fourth quarter, excluding special charges, were $17.6 million
or $.12 per diluted share. This compares to earnings in the prior year,
excluding a gain from discontinued operations of $.01 per diluted share, of
$16.8 million or $.12 per diluted share. Revenues for the fourth quarter of
Fiscal 2001 were $1.28 billion, compared to $1.37 billion for the same period in
the prior year. For the fourth quarter ended September 30, 2001, the Company
recorded a pretax restructuring and asset impairment charge totaling $60 million
plus reserve adjustments primarily related to the exit of the Company's
telephony operations of $5.3 million. The Company also recorded a $10 million
tax reserve adjustment in response to recent IRS position and court decisions on
the use of leveraged corporate owned life insurance programs. Including these
charges, for the fourth quarter of Fiscal 2001, the Company reported a loss of
$41.6 million or $.29 per diluted share.
Net Sales, which include the sale of copier/printer equipment, supplies, and
technology hardware, declined 11% from the prior year. Weak economic conditions
that tended to delay large purchasing decisions, as well as the Company's
strategic de-emphasis of low margin technology hardware, were the primary
drivers of these results. Within the mix of total copier/printer sales, revenues
associated with higher-end products, specifically segments 5 and 6 black & white
production equipment, continued to experience significant growth in the fourth
quarter. Gross profit margin on Net Sales increased substantially over the same
period in Fiscal 2000 due to operational improvements, as well as decreased
revenues from lower margin technology hardware.
Service & Rentals, which include revenues from the servicing of copier/printer
equipment, facilities management, and other services - including digital print
production, legal document services, network integration, technology education,
and e-business - declined 3% from the fourth quarter in the prior year. For the
first time in over two years, post-sale equipment service revenues showed
positive year-over-year comparisons, a strong performance indicator relative to
the Company's strategic focus on placing high-end products and workplace
solutions that leverage digital connectivity. Facilities management, IKON's
primary outsourcing offering, also experienced strong growth in the quarter.
Growth in these two key areas - equipment service and facilities management -
was offset by declines in other services, which were impacted by economic as
well as strategic downsizing. Gross profit margin on Service & Rentals showed a
minimal decline from the prior year.
Finance Income grew 9% due in part to a higher average yield on the lease
portfolio compared to the fourth quarter in the prior year and the increased
percentage of equipment sales leased through IOS Capital, IKON's captive leasing
subsidiary, due to the leverage provided by integrated field strategies.
Despite lower revenues, operating margins of 3.6% for the fourth quarter
improved slightly from the prior year, excluding the impact of special charges
for the fourth quarter of Fiscal 2001. While the Company considerably
strengthened gross margins through revenue mix strategies and productivity
enhancements, the rapid deterioration of the economic environment outpaced the
broad cost-cutting and headcount reduction initiatives announced earlier in the
fiscal year. The Company continues to diligently implement its productivity
initiatives and has trimmed headcount by over 2,200 since the beginning of the
fiscal year. The full effect from these cost saving actions will benefit future
quarters.
Fiscal 2002 Outlook
With little indication of significant economic recovery in the next twelve
months, revenues for Fiscal 2002 are anticipated to decline approximately 4% to
6%. Against this backdrop, the Company expects to deliver improved operational
performance for the fiscal year with earnings per diluted share anticipated to
be in the range of $.84 to $.89, reflecting the benefit of approximately $.24
per diluted share associated with the elimination of goodwill amortization in
accordance with the Company's adoption of Financial Accounting Standards Board
Statement No. 142 on October 1, 2001, or $.60 to $.65 per diluted share
excluding any goodwill impact.
"This has been a difficult year for the business community at large. IKON has
met the challenges posed by the economy, by changing industry conditions, and by
outside events. We continue to execute on our strategy to achieve our long-term
goals," said Mr. Forese. "IKON has gained financial and operational strength,
and we are positioned as well as or better than any company in our industry to
compete effectively in our chosen markets," concluded Mr. Forese.
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 document solutions, as well as network
design and consulting, e-business development and technology training. IOS
Capital, Inc., a wholly-owned subsidiary of IKON, provides lease financing to
customers and is one of the largest captive finance companies in North America.
With Fiscal 2001 revenues of $5.3 billion, IKON has approximately 600 locations
worldwide including the United States, Canada, Mexico, the United Kingdom,
France, Germany, Ireland and Denmark.
================================================================================
Additional information regarding the fourth quarter and fiscal year results
and the Company's outlook for the next fiscal year will be discussed on a
conference call hosted by IKON at 10:00 a.m. EST on Thursday, October 25,
2001. Please call (719) 457-2663 to participate. A complete replay of the
conference call will be available over the Internet on IKON's Investor
Relations homepage approximately two hours after the call ends. To listen,
please go to www.ikon.com and click on Invest in IKON. Beginning at 1:00 p.m.
EST on October 25, 2001 and ending at midnight EST on October 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 645778.
================================================================================
================================================================================
On Wednesday, November 7, 2001, IKON will host an Analyst & Investor
Conference in New York City. A live webcast of this event, along with
presentation materials, will be available through the Company's website in the
Investor Relations section. Please go to www.ikon.com, click on Invest in IKON
and select the Presentation section. The audio portion of the live webcast
will begin at 8:15 a.m. EST on November 7, 2001.
================================================================================
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 fiscal 2002 and its long-term growth strategy and
cost-saving actions. 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)
Fourth Quarter Fiscal
---------------------------------------------
2001 2000 % Change
--------------------- ------------------ -------------
Revenues
Net sales $ 632,844 $ 714,246 (11.4)%
Service and rentals 551,498 569,009 (3.1)
Finance income 98,703 90,191 9.4
------------------------------------------------------------------------------------------------------------
1,283,045 1,373,446 (6.6)
------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 408,966 482,077
Service and rental costs 336,120 344,386
Finance interest expense 45,169 44,851
Selling and administrative 451,459 454,172
Restructuring and asset impairment charges, net 60,000 (172)
------------------------------------------------------------------------------------------------------------
1,301,714 1,325,314
------------------------------------------------------------------------------------------------------------
Operating (loss) income (18,669) 48,132
Gain on sale of investment 451
Interest expense 15,151 17,887
------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations before income taxes (33,820) 30,696
Income taxes 7,786 13,874
------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations (41,606) 16,822
Discontinued operations, net of income taxes of $1,111 1,415
------------------------------------------------------------------------------------------------------------
Net (loss) income $ (41,606) $ 18,237
===================== ==================
Basic and Diluted (Loss) Earnings Per Common Share
Continuing operations ($0.29) $0.12
Discontinued operations 0.01
--------------------- ------------------
Net (loss) income ($0.29) $0.13
===================== ==================
Weighted Average Common Shares Outstanding, Basic 141,827 145,375
===================== ==================
Weighted Average Common Shares Outstanding, Diluted 141,827 145,375
===================== ==================
Operations Analysis:
Gross profit %, net sales 35.4% 32.5%
Gross profit %, service and rentals 39.1% 39.5%
Gross profit %, finance subsidiaries 54.2% 50.3%
Total gross profit % 38.4% 36.6%
Selling and administrative as a % of revenue 35.2% 33.1%
Operating (loss) income as a % of revenue -1.5% 3.5%
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Excluding Special Items
Fourth Quarter Fiscal
-----------------------------------------
2001 * 2000 ** % Change
----------------- ----------------- ----------------------
Revenues
Net sales $ 632,844 $ 714,246 (11.4)%
Service and rentals 551,498 569,009 (3.1)
Finance income 98,703 90,191 9.4
-------------------------------------------------------------------------------------------------
1,283,045 1,373,446 (6.6)
-------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 407,466 482,077
Service and rental costs 336,120 344,386
Finance interest expense 45,169 44,851
Selling and administrative 447,659 454,172
-------------------------------------------------------------------------------------------------
1,236,414 1,325,486
-------------------------------------------------------------------------------------------------
Operating income 46,631 47,960
Interest expense 15,151 17,887
-------------------------------------------------------------------------------------------------
Income before income taxes 31,480 30,073
Income taxes 13,851 13,232
-------------------------------------------------------------------------------------------------
Net income $ 17,629 $ 16,841
================= =================
Basic and Diluted Earnings Per Common Share $0.12 $0.12
================= =================
Weighted Average Common Shares Outstanding, Basic 141,827 145,375
================= =================
Weighted Average Common Shares Outstanding, Diluted 146,067 145,375
================= =================
Operations Analysis:
Gross profit %, net sales 35.6% 32.5%
Gross profit %, service and rentals 39.1% 39.5%
Gross profit %, finance subsidiaries 54.2% 50.3%
Total gross profit % 38.5% 36.6%
Selling and administrative as a % of revenue 34.9% 33.1%
Operating income as a % of revenue 3.6% 3.5%
* Fourth quarter fiscal 2001 excludes $60,000 restructuring and asset
impairment charges, $5,300 reserve adjustments primarily related to the
exit of the Company's telephony operations and $10,000 tax reserve
adjustment related to the Company's use of leveraged corporate owned life
insurance program.
** Fourth quarter fiscal 2000 excludes $451 gain on sale of investment, $172
net reversal of restructuring accrual and $2,526 benefit from discontinued
operations ($1,415 after-tax).
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Year Ended September 30,
------------------------------------------
2001 2000 % Change
------------------ ------------------ -----------
Revenues
Net sales $ 2,634,492 $ 2,794,882 (5.7)%
Service and rentals 2,255,293 2,306,783 (2.2)
Finance income 383,694 345,280 11.1
------------------------------------------------------------------------------------------------------------
5,273,479 5,446,945 (3.2)
------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,714,439 1,864,318
Service and rental costs 1,364,920 1,393,093
Finance interest expense 177,519 167,700
Selling and administrative 1,815,850 1,785,751
Shareholder litigation insurance proceeds (17,000)
Restructuring and asset impairment charges, net 60,000 105,168
------------------------------------------------------------------------------------------------------------
5,132,728 5,299,030
------------------------------------------------------------------------------------------------------------
Operating income 140,751 147,915
Gain on sale of investment 3,739
Interest expense 69,373 69,821
------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes
and extraordinary gain 71,378 81,833
Income taxes 54,073 55,873
------------------------------------------------------------------------------------------------------------
Income from continuing operations before extraordinary gain 17,305 25,960
Discontinued operations, net of income taxes
of: 2001 - $942 ; 2000 - $1,111 1,200 1,415
Extraordinary gain from early extinguishment of debt, net
of income taxes of $1,342 1,707
------------------------------------------------------------------------------------------------------------
Net income $ 18,505 $ 29,082
================== ==================
Basic and Diluted Earnings Per Common Share
Continuing operations $0.12 $0.18
Discontinued operations 0.01 0.01
Extraordinary gain 0.01
------------------ ------------------
Net income $0.13 $0.20
================== ==================
Weighted Average Common Shares Outstanding, Basic 141,888 148,207
================== ==================
Weighted Average Common Shares Outstanding, Diluted 144,408 148,327
================== ==================
Operations Analysis:
Gross profit %, net sales 34.9% 33.3%
Gross profit %, service and rentals 39.5% 39.6%
Gross profit %, finance subsidiaries 53.7% 51.4%
Total gross profit % 38.2% 37.1%
Selling and administrative as a % of revenue 34.4% 32.8%
Operating income as a % of revenue 2.7% 2.7%
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Excluding Special Items
Year Ended September 30,
-----------------------------------------
2001 * 2000 ** % Change
----------------- ------------------ --------------------
Revenues
Net sales $ 2,634,492 $ 2,794,882 (5.7)%
Service and rentals 2,255,293 2,306,783 (2.2)
Finance income 383,694 345,280 11.1
-----------------------------------------------------------------------------------------------------
5,273,479 5,446,945 (3.2)
-----------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,712,939 1,864,318
Service and rental costs 1,364,920 1,393,093
Finance interest expense 177,519 167,700
Selling and administrative 1,812,050 1,785,751
-----------------------------------------------------------------------------------------------------
5,067,428 5,210,862
-----------------------------------------------------------------------------------------------------
Operating income 206,051 236,083
Interest expense 69,373 69,821
-----------------------------------------------------------------------------------------------------
Income before income taxes 136,678 166,262
Income taxes 60,138 73,155
-----------------------------------------------------------------------------------------------------
Net income $ 76,540 $ 93,107
================= ==================
Basic Earnings Per Common Share $0.54 $0.63
================= ==================
Diluted Earnings Per Common Share $0.53 $0.63
================= ==================
Weighted Average Common Shares Outstanding, Basic 141,888 148,207
================= ==================
Weighted Average Common Shares Outstanding, Diluted 144,408 148,327
================= ==================
Operations Analysis:
Gross profit %, net sales 35.0% 33.3%
Gross profit %, service and rentals 39.5% 39.6%
Gross profit %, finance subsidiaries 53.7% 51.4%
Total gross profit % 38.3% 37.1%
Selling and administrative as a % of revenue 34.4% 32.8%
Operating income as a % of revenue 3.9% 4.3%
* Fiscal 2001 excludes $60,000 restructuring and asset impairment
charges, $5,300 reserve adjustments primarily related to the Company's
exit of telephony operations, $2,142 benefit from discontinued
operations ($1,200 after-tax) and $10,000 tax reserve adjustment
related to the Company's use of leveraged corporate owned life
insurance program.
** Fiscal 2000 excludes $17,000 of insurance proceeds related to the
shareholder litigation settlement, $105,168 restructuring and asset
impairment charges, $3,739 gain on sale of investment, $2,526 gain
from discontinued operations ($1,415 after-tax) and $3,049
extraordinary gain on early extinguishment of debt ($1,707 after-tax).
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.