Exhibit 99
IKON OFFICE SOLUTIONS ANNOUNCES
FIRST QUARTER RESULTS
Earnings Per Share Exceed High End of Expected Range
Company Executing on Operational Improvements
Valley Forge, Pennsylvania - January 25, 2002 -IKON Office Solutions (NYSE:IKN),
a leading provider of business communications solutions, today reported results
for its first fiscal quarter ended December 31, 2001. Net income for the first
quarter of Fiscal 2002 grew to $32.6 million. Earnings from continuing
operations increased to $.22 per diluted share compared to $.18 per diluted
share (assumes impact of SFAS 142 adoption), a 22% increase from the prior year.
"We are extremely pleased that we were able to exceed our own profitability
expectations for the first quarter," stated James J. Forese, Chairman and Chief
Executive Officer. "This performance reflects our commitment to deliver earnings
per share growth even as we continue to rationalize our revenue mix in terms of
long-term profitability and strategic value. We realize the vital importance of
reaching our Fiscal 2002 goals and are working hard to meet or surpass those
objectives."
Effective October 1, 2001, IKON adopted SFAS 142, which results in the
elimination of a significant portion of the Company's amortization expense on a
prospective basis. The above earnings comparison to the prior year is based on
pro forma results as if the new accounting rule applied to that period. These
pro forma results increase the quarterly diluted earnings per share in the prior
year from $.11 to $.18, excluding a $.01 gain from discontinued operations.
Revenues for the first quarter of Fiscal 2002 were $1.21 billion compared to
$1.32 billion for the same period a year ago. These results reflect the general
slowdown in the economic environment experienced since the first half of Fiscal
2001 in addition to the Company's continuing drive to improve the quality of its
revenue mix through de-emphasis, closure, or sale of selected businesses. The
Company continued to show positive performance in areas of strategic emphasis,
with double-digit growth in sales of high-end, segment 5 and 6 copiers/printers
and facilities management services.
"The foundation of IKON's long-term business model is the customer, since the
customer will ultimately define our industry," said Mr. Forese. "Today's
customer wants to leverage digital technology to reduce document costs and
improve productivity through document management solutions customized for their
business. These customers also demand reliable service and technical support,
and we have positioned IKON to deliver all of these capabilities.
"Being a leader in this changing industry also means that IKON must be highly
efficient, flexible, and quick to respond to rapidly evolving economic trends.
Our infrastructure initiatives - past and present - have been designed to
maximize these important characteristics. During the quarter, we continued to
execute on these important business drivers, as evidenced by our earnings
performance this quarter. We completed our exit from the telephony business,
sold our technology education business, and executed on a number of cost
reduction plans directed toward our core operations in North America and
Europe. We also took additional steps to strengthen the bottom line by
completing some tax planning during the quarter to lower the effective tax rate
expected for Fiscal 2002 from 38% to 36.5%.
"During the quarter, we also continued to make steady progress with our Oracle
e-business project. In the U.S., we entered the last phase of design and began
testing as we prepare for pilot implementation in the U.S., and in the U.K. our
operations went live on more than 15 Oracle e-business modules in December. All
of these actions are consistent with the strategies we have communicated, and we
are optimistic about IKON's future as we strengthen our focus, competitive
positioning, and infrastructure," concluded Mr. Forese.
Net Sales, which include the sale of copier/printer equipment, supplies, and
technology hardware, declined 13.1% from the prior year. Technology hardware,
which the Company has been de-emphasizing, declined sharply as anticipated.
Sales of copier/printer equipment also declined from the prior year as slow
economic conditions made for difficult year to year comparisons. A decline in
sales of lower-end copier/printer equipment was slightly offset by continued
strong growth in higher-end, segment 5 and 6 copier/printer sales.
Service & Rentals, which primarily includes revenues from the servicing of
copier/printer equipment, and outsourcing and other professional services
declined 4.7% from the prior year, primarily due to the downsizing of our
digital print production centers, and the sale of the Company's technology
education business in December 2001.
Finance Income grew 5.5% from the prior year due to continued growth in the
lease receivables portfolio as a greater percentage of IKON's customers take
advantage of IOS Capital, the Company's U.S. captive leasing organization, for
equipment financing.
Total Gross Profit increased from the prior year to 38.6% of revenues due to a
combination of revenue mix - higher margin products and services comprising a
larger percentage of IKON's total revenues for the quarter - and stronger than
anticipated margins on equipment sales and equipment service.
Selling and Administrative Costs declined $47.6 million from the prior year,
largely due to the operational improvements previously discussed, lower selling
costs, disciplined cost controls throughout the organization, as well as the
elimination of goodwill amortization under SFAS 142.
Outlook
"Our second quarter performance should look similar to the first quarter, with
diluted earnings per share in the $.20 to $.23 range, and revenues down
approximately 7% to 9%. We are encouraged by our progress this quarter and
remain confident that we can deliver on our Fiscal 2002 objectives. Therefore,
we reiterate our expectations for diluted earnings per share of $.84 to $.89 for
Fiscal 2002 on a revenue decline of 4% to 6%," 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, and e-business development. IOS Capital, LLC, 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 first 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 Friday, January 25, 2002.
Please call (913) 981-5522 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 January
25, 2002 and ending at midnight on January 30, 2002, a complete replay of the
conference call can also be accessed via telephone by calling (719) 457-0820
and using the access code 762226.
================================================================================
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 second quarter and fiscal year 2002 and the
long-term profitability and strategies. 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. Certain additional risks
and uncertainties are set forth in IKON's 2001 Annual Report on Form 10-K filed
with the Securities and Exchange Commission. 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.
# # #
IKON Office Solutions, Inc. Exhibit 99
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
(Unaudited)
First Quarter Fiscal
---------------------------------
2002 2001
------------ ------------
Revenues
Net sales $ 568,997 $ 655,071
Service and rentals 542,923 569,613
Finance income 98,529 93,367
- ------------------------------------------------------------------------------------------------
1,210,449 1,318,051
- ------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 374,347 434,993
Service and rental costs 327,538 342,054
Finance interest expense 41,165 46,204
Selling and administrative 401,584 449,155
- ------------------------------------------------------------------------------------------------
1,144,634 1,272,406
- ------------------------------------------------------------------------------------------------
Operating income 65,815 45,645
Interest expense 14,511 16,754
- ------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 51,304 28,891
Income taxes 18,726 12,712
- ------------------------------------------------------------------------------------------------
Income from continuing operations 32,578 16,179
Discontinued operations, net of income taxes of $942 1,200
- ------------------------------------------------------------------------------------------------
Net income $ 32,578 $ 17,379
============ ============
Basic Earnings Per Common Share
Continuing operations $ 0.23 $ 0.11
Discontinued operations 0.01
------------ ------------
Net income $ 0.23 $ 0.12
============ ============
Diluted Earnings Per Common Share
Continuing operations $ 0.22 $ 0.11
Discontinued operations 0.01
------------ ------------
Net income $ 0.22 $ 0.12
============ ============
Weighted Average Common Shares Outstanding, Basic 141,885 142,789
============ ============
Weighted Average Common Shares Outstanding, Diluted 146,394 142,883
============ ============
Operations Analysis:
Gross profit %, net sales 34.2% 33.6%
Gross profit %, service and rentals 39.7% 39.9%
Gross profit %, finance subsidiaries 58.2% 50.5%
Total gross profit % 38.6% 37.5%
Selling and administrative as a % of revenue 33.2% 34.1%
Operating income as a % of revenue 5.4% 3.5%
IKON Office Solutions, Inc. Exhibit 99
FINANCIAL SUMMARY (in thousands, except earnings per share)
EXCLUDING SPECIAL ITEMS
(Unaudited)
First Quarter Fiscal
---------------------------------
2002 2001 *
------------ ------------
Revenues
Net sales $ 568,997 $ 655,071
Service and rentals 542,923 569,613
Finance income 98,529 93,367
- ----------------------------------------------------------------------------------------------
1,210,449 1,318,051
- ----------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 374,347 434,993
Service and rental costs 327,538 342,054
Finance interest expense 41,165 46,204
Selling and administrative 401,584 449,155
- ----------------------------------------------------------------------------------------------
1,144,634 1,272,406
- ----------------------------------------------------------------------------------------------
Operating income 65,815 45,645
Interest expense 14,511 16,754
- ----------------------------------------------------------------------------------------------
Income before income taxes 51,304 28,891
Income taxes 18,726 12,712
- ----------------------------------------------------------------------------------------------
Net income $ 32,578 $ 16,179
============ ============
Basic Earnings Per Common Share $ 0.23 $ 0.11
============ ============
Diluted Earnings Per Common Share $ 0.22 $ 0.11
============ ============
Weighted Average Common Shares Outstanding, Basic 141,885 142,789
============ ============
Weighted Average Common Shares Outstanding, Diluted 146,394 142,883
============ ============
Operations Analysis:
Gross profit %, net sales 34.2% 33.6%
Gross profit %, service and rentals 39.7% 39.9%
Gross profit %, finance subsidiaries 58.2% 50.5%
Total gross profit % 38.6% 37.5%
Selling and administrative as a % of revenue 33.2% 34.1%
Operating income as a % of revenue 5.4% 3.5%
<FN>
* First quarter fiscal 2001 excludes a gain from discontinued operations of
$2,142 ($1,200 after-tax).
</FN>
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.