Exhibit 99
IKON OFFICE SOLUTIONS ANNOUNCES
SECOND QUARTER RESULTS
26% Increase in Earnings Per Share
Execution Continues to Generate Operational Improvements
Valley Forge, Pennsylvania - April 25, 2002 -IKON Office Solutions (NYSE:IKN), a
leading provider of business communications solutions, today reported results
for its second fiscal quarter ended March 31, 2002. Net income for the second
quarter of Fiscal 2002 was $35.3 million, or $.24 per diluted share. These
results represent a 26% increase over $.19 per diluted share (assumes impact of
not amortizing goodwill in accordance with SFAS 142) in the prior year,
exceeding the Company's expectations for this quarter.
"In an operating environment that continues to challenge the business community,
we delivered another quarter of strong earnings and solid cash generation,"
stated James J. Forese, Chairman and Chief Executive Officer. "IKON has been on
a consistent and well-defined strategic path to leverage the earnings potential
of our powerful sales and service organization. For Fiscal 2002, we set out to
deliver substantial earnings improvement following many of the revenue mix and
infrastructure investments we have made, and our results to date clearly
indicate that our strategies are on track."
Revenues for the second quarter of Fiscal 2002 were $1.22 billion, compared to
$1.36 billion for the same period a year ago. The overall decline in revenues
reflects both strategic decisions to exit and de-emphasize certain businesses in
order to improve long-term profitability, and delays in customer decisions for
procurement of copier/printer equipment due to the significant decline in
economic conditions since the second quarter of last year. The Company's revenue
strategy also includes an emphasis on higher-end products and larger accounts
that maximize productivity and leverage the Company's broad array of solutions
and service capabilities. These strategic shifts have continued to impact the
top line while improving overall operational results.
Steady performance was achieved in the quarter in targeted growth areas as
evidenced by increased sales of high-end black & white and production color
devices and facilities management services. Growth in these areas was enhanced
through continued expansion into more major and national accounts during the
quarter. While equipment revenues remained more sensitive to the economic
environment, the Company's other revenue sources, such as equipment service,
outsourcing, and leasing, are more recurring in nature and therefore more
insulated from shifts in the economic environment.
"We are executing our strategies on a consistent basis and becoming a leaner,
more productive company. While earnings improvement remains our predominant
focus in 2002, we have not lost sight of the importance of gaining market share
and solidifying existing customer relationships," said Mr. Forese. "Our sales
force is energized going into our second half, and we intend to maintain our
drive to strengthen our leadership position in the industry and seize
opportunities in targeted markets."
Net Sales, which includes the sale of copier/printer equipment, supplies, and
technology hardware, declined 16% from the prior year. The decline in Net Sales
is primarily attributable to the decline in technology hardware and sales of
copier/printer equipment. The Company has been de-emphasizing sales of
technology hardware as part of its margin
improvement strategy as it shifts technology resources within the Company to
support customer opportunities involving connectivity and document management
consulting. While sales of copier/printer equipment demonstrated a sequential
improvement from the first quarter, the year over year comparison was
significantly impacted by this year's slower economic conditions. In addition,
these results also reflect the decline in the sale of lower-end devices as the
Company continues to realign its product mix to enhance margins and improve
overall profitability. Sales of higher-end, segment 5 and 6 equipment and
production color devices continued to demonstrate strong, double-digit growth
compared to the prior year.
Service & Rentals, which primarily includes revenues from the servicing of
copier/printer equipment, and outsourcing and other services, declined 6% from
the prior year. Copier/printer service revenues increased slightly from the
prior year due to product mix strategies focused on improving aftermarket
revenue streams. Outsourcing and other services declined from the prior year
primarily due to the downsizing, sale, and closure of certain non-strategic
businesses - a strategy that has successfully contributed to strengthened
operational results. Facilities management, the Company's largest outsourcing
offering, continued to deliver growth in the quarter, despite a slight slowdown
in customer activity due to general economic conditions.
Finance Income grew 6% from the prior year due to continued growth in the lease
receivables portfolio and longer average lease terms. In North America, more
than 78% of IKON's customers utilized IOS Capital, the Company's U.S. captive
leasing organization, for equipment financing in the first six months of the
fiscal year.
Total Gross Profit improved over the prior year to 38.6% of revenues due to
productivity improvements, product mix strategies, and strong fundamental and
strategic disciplines throughout the organization.
Selling and Administrative Costs declined $57.1 million from the prior year as
the Company moves toward its goal of removing over $190 million in costs from
Fiscal 2001 levels through operational investments, revenue strategies,
disciplined cost controls throughout the organization, as well as the
elimination of approximately $10 million of goodwill amortization under SFAS
142.
Operating Margin was 5.7% compared to 3.6% in the second quarter a year ago, or
4.4% assuming goodwill amortization was not expensed in the second quarter of
Fiscal 2001. This increase reflects the benefits of the Company's ongoing work
in streamlining both its revenue composition and infrastructure to achieve
significant long-term operating margin improvement.
Outlook
"We are encouraged by our operational progress and are looking for even more
improvement for Fiscal 2002, with earnings per diluted share now expected to be
in the $.87 - $.92 range, compared to our previously communicated range of
$.84-$.89," said Mr. Forese. "Our strategies are delivering their intended
results, and we anticipate continued execution in our second half as we place
additional focus on growing the strategic areas of our business. Revenues are
anticipated to decline 6% to 8% for the year. We are maintaining a cautious
stance on revenue given the economic environment. As we have said before, `we
are positioning the Company for growth, but not counting it,' as we work to
deliver substantial earnings improvements for Fiscal 2002. Third quarter
earnings should be in the range of $.23 to $.26 per diluted share, on a revenue
decline of 5% to 7%, with the benefit of typically stronger equipment and
equipment service revenues offset, in part, by increased selling costs and
increased costs related to our Oracle e-business project."
"Our balance sheet continues to strengthen and benefit from improved asset
management," continued Mr. Forese. "Our cash generation was strong in the second
quarter, with free cash flow for the first half of Fiscal 2002 ahead of
expectations. As a result, we are increasing our full year free cash flow
expectation to a range of $220 million to $230 million."
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 second 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, April 25, 2002.
Please call (719) 457-2606 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 April 25,
2002 and ending at midnight on April 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 723043.
================================================================================
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 third 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/A
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)
Second Quarter Fiscal
---------------------------------------------
2002 2001
--------------------- ------------------
Revenues
Net sales $ 591,441 $ 704,719
Service and rentals 529,445 562,520
Finance income 99,288 93,987
- -----------------------------------------------------------------------------------------------------------------------
1,220,174 1,361,226
- -----------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 390,680 460,619
Service and rental costs 321,570 348,891
Finance interest expense 36,995 44,363
Selling and administrative 401,267 458,356
- -----------------------------------------------------------------------------------------------------------------------
1,150,512 1,312,229
- -----------------------------------------------------------------------------------------------------------------------
Operating income 69,662 48,997
Interest expense 14,085 19,123
- -----------------------------------------------------------------------------------------------------------------------
Income before income taxes 55,577 29,874
Income taxes 20,286 13,144
- -----------------------------------------------------------------------------------------------------------------------
Net income $ 35,291 $ 16,730
===================== ==================
Basic Earnings Per Common Share $ 0.25 $ 0.12 *
===================== ==================
Diluted Earnings Per Common Share $ 0.24 $ 0.12 *
===================== ==================
Weighted Average Common Shares Outstanding, Basic 142,965 141,402
===================== ==================
Weighted Average Common Shares Outstanding, Diluted 147,777 143,262
===================== ==================
Operations Analysis:
Gross profit %, net sales 33.9% 34.6%
Gross profit %, service and rentals 39.3% 38.0%
Gross profit %, finance subsidiaries 62.7% 52.8%
Total gross profit % 38.6% 37.3%
Selling and administrative as a % of revenue 32.9% 33.7%
Operating income as a % of revenue 5.7% 3.6%
* Effective October 1, 2001, IKON adopted Statement of Financial Accounting
Standards 142, Goodwill and Other Intangible Assets, which requires that
goodwill no longer be amortized. If IKON had not amortized goodwill in the
second quarter of Fiscal 2001, basic and diluted earnings per share would have
been $0.19.
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
(unaudited)
Year to Date Fiscal
-----------------------------------------
2002 2001
------------------ -----------------
Revenues
Net sales $ 1,160,438 $ 1,359,790
Service and rentals 1,072,368 1,132,133
Finance income 197,817 187,354
- ----------------------------------------------------------------------------------------------------------------------------
2,430,623 2,679,277
- ----------------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 765,027 895,612
Service and rental costs 649,108 690,945
Finance interest expense 78,160 90,567
Selling and administrative 802,851 907,511
- ----------------------------------------------------------------------------------------------------------------------------
2,295,146 2,584,635
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 135,477 94,642
Interest expense 28,596 35,877
- ----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes 106,881 58,765
Income taxes 39,012 25,856
- ----------------------------------------------------------------------------------------------------------------------------
Income from continuing operations 67,869 32,909
Discontinued operations, net of income taxes of $942 1,200
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 67,869 $ 34,109
================== =================
Basic Earnings Per Common Share
Continuing operations $ 0.48 $ 0.23
Discontinued operations - 0.01
------------------ -----------------
Net income $ 0.48 $ 0.24 *
================== =================
Diluted Earnings Per Common Share
Continuing operations $ 0.46 $ 0.23
Discontinued operations - 0.01
------------------ -----------------
Net income $ 0.46 $ 0.24 *
================== =================
Weighted Average Common Shares Outstanding, Basic 142,419 142,087
================== =================
Weighted Average Common Shares Outstanding, Diluted 147,080 143,005
================== =================
Operations Analysis:
Gross profit %, net sales 34.1% 34.1%
Gross profit %, service and rentals 39.5% 39.0%
Gross profit %, finance subsidiaries 60.5% 51.7%
Total gross profit % 38.6% 37.4%
Selling and administrative as a % of revenue 33.0% 33.9%
Operating income as a % of revenue 5.6% 3.5%
* Effective October 1, 2001, IKON adopted Statement of Financial Accounting
Standards 142, Goodwill and Other Intangible Assets, which requires that
goodwill no longer be amortized. If IKON had not amortized goodwill in the six
months ended March 31, 2001, basic and diluted earnings per share would have
been $0.38.
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Excluding Special Items
(unaudited)
Year to Date Fiscal
-----------------------------------------
2002 2001*
------------------ -----------------
Revenues
Net sales $ 1,160,438 $ 1,359,790
Service and rentals 1,072,368 1,132,133
Finance income 197,817 187,354
- ----------------------------------------------------------------------------------------------------------------------------
2,430,623 2,679,277
- ----------------------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 765,027 895,612
Service and rental costs 649,108 690,945
Finance interest expense 78,160 90,567
Selling and administrative 802,851 907,511
- ----------------------------------------------------------------------------------------------------------------------------
2,295,146 2,584,635
- ----------------------------------------------------------------------------------------------------------------------------
Operating income 135,477 94,642
Interest expense 28,596 35,877
- ----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 106,881 58,765
Income taxes 39,012 25,856
- ----------------------------------------------------------------------------------------------------------------------------
Net income $ 67,869 $ 32,909
================== =================
Basic Earnings Per Common Share $ 0.48 $ 0.23 **
================== =================
Diluted Earnings Per Common Share $ 0.46 $ 0.23 **
================== =================
Weighted Average Common Shares Outstanding, Basic 142,419 142,087
================== =================
Weighted Average Common Shares Outstanding, Diluted 147,080 143,005
================== =================
Operations Analysis:
Gross profit %, net sales 34.1% 34.1%
Gross profit %, service and rentals 39.5% 39.0%
Gross profit %, finance subsidiaries 60.5% 51.7%
Total gross profit % 38.6% 37.4%
Selling and administrative as a % of revenue 33.0% 33.9%
Operating income as a % of revenue 5.6% 3.5%
* Year to date Fiscal 2001 excludes a gain from discontinued operations of
$2,142 ($1,200 after-tax).
** Effective October 1, 2001, IKON adopted Statement of Financial Accounting
Standards 142, Goodwill and Other Intangible Assets, which requires that
goodwill no longer be amortized. If IKON had not amortized goodwill in the six
months ended March 31, 2001, basic and diluted earnings per share would have
been $0.37.
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.