IKON Receivables Funding, LLC
FORM 10-K
September 30, 2002
As filed with the Securities and Exchange Commission on December 26, 2002
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
|X| Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 2002 or
|_| Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______ to _______.
Commission file number 333-71362
______________________________________
IKON RECEIVABLES FUNDING, LLC
(Exact name of registrant as specified in its charter)
DELAWARE 52-2652209
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1738 Bass Road, P.O. Box 9115, Macon, Georgia 31208
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (478) 471-2300
______________________________________
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act). Yes [_] No [X]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|
Registered debt outstanding as of December 26, 2002 was $552,505,654.
Documents incorporated by reference:
None
The registrant meets the conditions set forth in General Instruction (I)(1)(a)
and (b) of Form 10-K and is therefore filing with the reduced disclosure format
contemplated thereby.
INDEX*
Page No.
PART I
ITEM 1. BUSINESS 1
ITEM 2. PROPERTIES 1
ITEM 3. LEGAL PROCEEDINGS 1
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 1
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 2
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 3
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 3
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE 3
PART III
ITEM 14. CONTROLS AND PROCEDURES 3
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K 4
*All amounts contained in this annual report on Form 10-K are in thousands
unless otherwise noted.
Forward-Looking Information
This Report includes or incorporates by reference, information which may
constitute forward-looking statements within the meaning of the federal
securities laws. Although IKON Receivables Funding, LLC (the "Company") 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 information is based upon management's current plans or
expectations and is subject to a number of risks and uncertainties that could
significantly affect current plans, anticipated actions and the future financial
condition and results of IKON Office Solutions, Inc. ("IKON") and IOS Capital,
LLC ("IOSC"). These risks and uncertainties, which apply to the Company, IOSC
and IKON, include, but are not limited to, risks and uncertainties relating to:
factors which may affect the Company's ability to recoup the full amount due on
the Leases (such as lessee defaults or factors impeding recovery efforts);
growth opportunities and increasing market share, productivity and
infrastructure initiatives; earnings, revenue, cash flow, margin, and
cost-savings projections; the effect of competitive pressures on equipment
sales; expected savings and lower costs from the productivity and infrastructure
initiatives; developing and expanding strategic alliances and partnerships, the
impact of e-commerce and e-procurement initiatives; the implementation of
e-IKON; anticipated growth rates in the digital and color equipment and
outsourcing industries; the effect of foreign currency exchange risk; the
reorganization of the Company's business segments and the anticipated benefits
of operational synergies related thereto; and the Company's ability to finance
its current operations and its growth initiatives. As a consequence of these and
other risks and uncertainties, current plans, anticipated actions and future
financial condition and results may differ materially from those expressed in
any forward-looking statements made by or on behalf of the Company.
PART I
ITEM 1. Business
IKON Receivables Funding, LLC (the "Company") is a special purpose
Delaware limited liability company, all of the membership interests in which are
held by IKON Receivables-2, LLC ("Sole Member"), also a special purpose Delaware
limited liability company. All of the membership interests in the Sole Member
are owned by IOS Capital, LLC ("IOSC"), a wholly-owned finance subsidiary of
IKON Office Solutions, Inc. ("IKON"), a publicly traded company with fiscal 2002
revenues of approximately $4.8 billion. IKON is a leading provider of products
and services that help businesses manage document workflow and increase
efficiency. 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. The Company was organized in the State of Delaware on October 9,
2001 and is managed by IKON Receivables Funding, Inc. (the "Manager").
The Company was organized to engage exclusively in the following
business and financial activities: to purchase or acquire from IKON, or any
subsidiary or affiliate of IKON, any right to payment, whether constituting an
account, chattel paper, instrument or general intangible, and certain related
property (other than equipment) and rights (collectively, "Lease Receivables"),
and hold, sell, transfer, pledge or otherwise dispose of Lease Receivables or
interests therein; to enter into any agreement related to any Lease Receivables
that provides for the administration, servicing and collection of amounts due on
such Lease Receivables and any interest rate hedging arrangements in connection
therewith; to distribute Lease Receivables or proceeds from Lease Receivables
and any other income to its Sole Member; and to engage in any lawful act or
activity and to exercise any power that is incidental and is necessary or
convenient to the foregoing and permitted under Delaware law.
Neither the Sole Member nor the Manager is liable for the debts,
liabilities, contracts or other obligations of the Company solely by reason of
being the Sole Member or Manager of the Company.
The Company's organizational documents require it to operate in such a
manner that it should not be consolidated in the bankruptcy estate of the Sole
Member, IOSC, or IKON, should any of these entities become subject to such a
proceeding. The Company is legally separate from each of the foregoing entities,
and the assets of the Company, including, without limitation, the Lease
Receivables, are not available to the creditors of the Sole Member, IOSC, or
IKON.
ITEM 2. Properties
The Registrant does not utilize any facilities. Actions related to
servicing and maintaining the Registrant's assets are performed by IOSC.
ITEM 3. Legal Proceedings
None.
PART II
ITEM 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
There is currently no market for the Registrant's equity securities nor
is it anticipated that such a market will develop.
1
ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Pursuant to General Instruction I(2)(a) of Form 10-K, the following
analysis of the results of operations is presented in lieu of Management's
Discussion and Analysis of Financial Condition and Results of Operations.
On May 30, 2002, the Company issued $634,800 of lease-backed notes (the
"Notes") pursuant to a shelf registration statement filed with the Securities
and Exchange Commission. The Notes are described below:
Principal
Amount
Principal Outstanding at Stated
Issuance Issuance September 30, Interest Maturity
Series Notes Date Amount 2002 Rate Date
------ ----- ---- ------ ---- ---- ----
2002-1 Class A-1 05/30/02 $ 171,000 $106,424 2.044% June 2003
Class A-2 05/30/02 46,000 46,000 2.91% February 2005
Class A-3 05/30/02 266,400 266,400 3.90% October 2006
Class A-4 05/30/02 151,400 151,400 4.68% November 2009
--------- --------
Total $ 634,800 $570,224
========= ========
The Notes were issued pursuant to an indenture ("Indenture") between the
Company, IOSC, and the Indenture trustee. The Notes are collateralized by a pool
of office equipment leases or contracts and related assets (the "Leases")
acquired or originated by IOSC (together with the equipment financing portion of
each periodic lease or rental payment due under the Leases on or after the
related indenture date) and all related casualty payments, retainable deposits,
and termination payments. Payments on the Notes are made from payments on the
Leases. The Notes have certain credit enhancement features available to
noteholders, including reserve accounts, overcollateralization accounts and
noncancelable insurance policies from Ambac Assurance Corporation with respect
to the Notes. On each payment date, funds available from the collection of lease
receivables will be paid to the noteholders in the order of their priority
class.
IOSC services the Leases and may delegate its servicing responsibilities to
one or more sub-servicers, but such delegation does not relieve IOSC of its
liabilities with respect thereto. IOSC retains possession of the Leases and
related files, and receives a monthly service fee from the Company for servicing
the Leases.
Restricted cash on the balance sheet represents the cash that has been
collected on the leases that are pledged as collateral for lease-backed notes.
This cash must be segregated within two business days into a trust account and
the cash is used to pay the principal and interest on lease-backed notes as well
as any associated administrative expenses. The level of restricted cash is
impacted from one period to the next by the volume of leases pledged as
collateral on the lease-backed notes and timing of collections on such leases.
As of September 30, 2002, the Company had approximately $1,865,200
available under the $2,500,000 shelf registration statement.
Future maturities of the Notes, based on contractual maturities of the
Leases for each of the succeeding fiscal years, are as follows:
2002-1
Series Notes
------------
2003 $ 191,375
2004 178,300
2005 132,840
2006 67,709
------------
$ 570,224
============
2
Interest income earned on the Leases offsets interest expense on the Notes,
amortization of debt issuance costs and the fees charged by IOSC for servicing
the Leases and providing administrative services to the Company. For the fiscal
year ended September 30, 2002, income generated from the Leases was $29,779,
interest income on restricted cash was $110, while interest expense during this
period was $8,323 and administrative expenses were $1,365. Income taxes for the
fiscal year ended September 30, 2002 were $8,080. The effective income tax rate
was 40%.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company incurs debt to fund the origination of leases for IKON. The
interest rates charged on the debt are determined based on current market
conditions and all outstanding notes were fixed at the time of issuance.
Therefore, the Company has not entered into interest rate swap agreements or
other market risk instruments for any purpose.
ITEM 8. Financial Statements and Supplementary Data
The financial statements of the Company are submitted herewith on Pages
F-1 through F-8 of this report.
Quarterly Data
The following table shows summarized results for the fiscal year ended
September 30, 2002:
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
-------------------------------------------------------------------------
Lease finance income $ - $ - $ 11,862 $ 17,917 $ 29,779
Interest expense - - 2,259 6,064 8,323
Net income - - 5,638 6,483 12,121
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
(No response to this item is required.)
PART III
ITEM 14. Controls and Procedures
(No response to this item is required.)
3
PART IV
ITEM 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of Financial Statements
Page
--------------
Report of Independent Accountants F-1
Balance Sheet at September 30, 2002 F-2
Statement of Income for the fiscal year ended September 30, 2002 F-3
Statement of Cash Flows for the fiscal year ended September 30, 2002 F-4
Statement of Changes in Member's Deficit for the fiscal year ended
September 30, 2002 F-5
Notes to Financial Statements F-6
Financial Statements and Schedules other than those listed above are
omitted because the required information is included in the financial statements
or the notes thereto or because they are inapplicable.
(b) Exhibits
3.1 Certificate of Formation of IKON Receivables Funding, LLC, filed as
Exhibit 3.1 to the Company's Registration Statement on Form S-3 (File No.
333-71362), is incorporated herein by reference.
3.2 Limited Liability Company Agreement of IKON Receivables Funding, LLC,
filed as Exhibit 3.2 to the Company's Registration Statement on Form S-3
(File No. 333-71362), is incorporated herein by reference.
10.1 Indenture, dated as of May 1, 2002, among IKON Receivables Funding, LLC,
BNY Midwest Trust Company, as Trustee, and IOS Capital, LLC, as Servicer,
filed as Exhibit 4.1 to IKON Receivables Funding, LLC's Form 8-K dated
May 30, 2002 is incorporated herein by reference.
10.2 Assignment and Servicing Agreement, dated as of May 1, 2002, among IKON
Receivables Funding, LLC, IKON Receivables-2, LLC, and IOS Capital, LLC
as Originator and Servicer filed as Exhibit 10.1 to IKON Receivables
Funding, LLC's Form 8-K dated May 30, 2002 is incorporated herein by
reference.
10.3 Indemnification Agreement, dated May 30, 2002, among Banc of America
Securities LLC, Lehman Brothers Inc. and First Union Securities LLC, as
Underwriters, and Ambac Assurance Corporation, as Insurer, filed as
Exhibit 10.2 to IKON Receivables Funding, LLC's Form 8-K dated May 30,
2002 is incorporated herein by reference.
10.4 Insurance and Indemnity Agreement, dated May 30, 2002, among IOS Capital,
LLC, as Originator and Servicer, IKON Receivables Funding, LLC, IKON
Receivables-2, LLC, BNY Midwest Trust Company and Ambac Assurance
Corporation, as Insurer, filed as Exhibit 10.3 to IKON Receivables
Funding, LLC's Form 8-K dated May 30, 2002 is incorporated herein by
reference.
12 Ratio of Earnings to Fixed Charges.
23 Consent of PricewaterhouseCoopers LLP.
99.1 Certifications Pursuant to 18 U.S.C. Section 1850, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
(c) Reports on Form 8-K
None.
4
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of IKON Office Solutions, Inc.
In our opinion, the accompanying balance sheet as of September 30, 2002 and the
related statement of income, cash flows and member's deficit, present fairly, in
all material respects, the financial position of IKON Receivables Funding, LLC
at September 30, 2002, and the results of its operations and its cash flows for
the year then ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Philadelphia, PA
December 2, 2002
F-1
IKON RECEIVABLES FUNDING, LLC
BALANCE SHEET
September 30,
2002
---------
Assets
Investments in leases:
Financing lease receivables $ 741,005
Less: Unearned income (138,799)
---------
602,206
Cash 1
Restricted cash 27,015
Accounts receivable 10,586
Prepaid expenses and other assets 1,895
---------
Total assets $ 641,703
=========
Liabilities and Member's Deficit
Liabilities:
Accrued expenses $ 978
Lease-backed notes 570,224
Deferred income taxes 240,882
---------
Total liabilities 812,084
---------
Commitments and contingencies
Member's deficit:
Contributed capital (182,502)
Retained earnings 12,121
---------
Total member's deficit (170,381)
---------
Total liabilities and member's deficit $ 641,703
=========
See accompanying notes to financial statements.
F-2
IKON RECEIVABLES FUNDING, LLC
STATEMENT OF INCOME
Fiscal Year Ended
September 30, 2002
------------------
Revenues:
Lease finance income $29,779
Interest income on restricted cash 110
-------
29,889
-------
Expenses:
Interest 8,323
General and administrative 1,365
-------
9,688
-------
Income before income taxes 20,201
Provision for income taxes 8,080
-------
Net income $12,121
=======
See accompanying notes to financial statements.
F-3
IKON RECEIVABLES FUNDING, LLC
STATEMENT OF CASH FLOWS
Fiscal Year Ended
September 30, 2002
---------------------
Cash flows from operating activities
Net income $ 12,121
Adjustments to reconcile net income to net cash used in operating
activities:
Amortization 279
Provision for deferred taxes 8,080
Changes in operating assets and liabilities:
Increase in accounts receivable (10,586)
Increase in prepaid expenses and other assets (2,174)
Increase in accrued expenses 978
---------
Net cash provided by operating activities 8,698
---------
Cash flows from investing activities
Investments in leases:
Collections, net of financing income 68,390
---------
Net cash provided by investing activities 68,390
---------
Cash flows from financing activities
Proceeds from issuance of lease-backed notes 634,800
Payments on lease-backed notes (64,576)
Deposits to restricted cash (27,015)
Capital contribution from Sole Member 1
Capital distributed to Sole Member (620,297)
---------
Net cash used in financing activities (77,087)
---------
Increase in cash 1
Cash at beginning of year --
---------
Cash at end of year $ 1
=========
Supplemental financing activities:
Noncash capital contributions $ 706,032
=========
Interest paid $ 9,301
=========
See accompanying notes to financial statements.
F-4
IKON RECEIVABLES FUNDING, LLC
STATEMENT OF CHANGES IN MEMBER'S DEFICIT
Contributed Retained
Capital Earnings Total
--------- --------- ---------
Net income $ 12,121 $ 12,121
Initial cash contribution by Sole Member $ 1 1
Equipment leases contributed by Sole Member,
net of deferred taxes of $268,238 402,358 402,358
Distributions to Sole Member (620,297) (620,297)
Reversal of income tax liability (Note 2) 35,436 35,436
--------- --------- ---------
Balance at September 30, 2002 $(182,502) $ 12,121 $(170,381)
========= ========= =========
See accompanying notes to financial statements.
F-5
IKON RECEIVABLES FUNDING, LLC
NOTES TO FINANCIAL STATEMENTS
1. Organization
IKON Receivables Funding, LLC (the "Company") is a special purpose Delaware
limited liability company, all of the membership interests in which are held by
IKON Receivables-2, LLC ("Sole Member"), also a special purpose Delaware limited
liability company. All of the membership interests in the Sole Member are owned
by IOS Capital, LLC ("IOSC"), a wholly-owned finance subsidiary of IKON Office
Solutions, Inc. ("IKON"), a publicly traded company with fiscal 2002 revenues of
approximately $4.8 billion. IKON is a leading provider of products and services
that help businesses manage document workflow and increase efficiency. 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.
The Company was organized in the State of Delaware on October 9, 2001 and is
managed by IKON Receivables Funding, Inc. (the "Manager").
The Company was organized to engage exclusively in the following business
and financial activities: to purchase or acquire from IKON, or any subsidiary or
affiliate of IKON, any right to payment, whether constituting an account,
chattel paper, instrument or general intangible, and certain related property
(other than equipment) and rights (collectively, "Lease Receivables"), and hold,
sell, transfer, pledge or otherwise dispose of Lease Receivables or interests
therein; to enter into any agreement related to any Lease Receivables that
provides for the administration, servicing and collection of amounts due on such
Lease Receivables and any interest rate hedging arrangements in connection
therewith; to distribute Lease Receivables or proceeds from Lease Receivables
and any other income to its Sole Member; and to engage in any lawful act or
activity and to exercise any power that is incidental and is necessary or
convenient to the foregoing and permitted under Delaware law.
Neither the Sole Member nor the Manager is liable for the debts,
liabilities, contracts or other obligations of the Company solely by reason of
being the Sole Member or Manager of the Company.
The Company's organizational documents require it to operate in such a
manner that it should not be consolidated in the bankruptcy estate of the Sole
Member, IOSC, or IKON, should any of these entities become subject to such a
proceeding. The Company is legally separate from each of the foregoing entities,
and the assets of the Company, including, without limitation, the Lease
Receivables, are not available to the creditors of the Sole Member, IOSC, or
IKON.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect amounts reported in the financial statements and notes.
Actual results could differ from those estimates and assumptions.
Revenue Recognition
Finance income and rental income are recognized over the related lease
term. Revenue for other income is recognized in the period earned.
Income Taxes
The Company is classified as a single-member limited liability corporation
and, as such, is disregarded as an entity separate from its owners for income
tax purposes. Income taxes are reported in accordance with an informal tax
sharing agreement with IKON. The income tax provision provided by the Company
pursuant to this agreement is on a separate return basis.
The net investment in leases represents the uncollected contractual cash
flow of the leases that were contributed to the Company by the Sole Member in
the form of contributed capital. The tax basis and related income tax benefits
attributable to the leases are retained by the Sole Member. Therefore, the
contribution of the leases resulted in a deferred tax liability and is
attributed to the differences between the book and tax basis of the net leases
outstanding as calculated by the Company pursuant to Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Because the Company
is not obligated to reimburse the Sole Member for
F-6
current income taxes, all reversals of the deferred tax liability to current
income taxes payable and any current income taxes payable are considered
additional capital contributions from the Sole Member.
Restricted Cash
Restricted cash on the balance sheet represents the cash that has been
collected on the leases that are pledged as collateral for lease-backed notes.
This cash must be segregated within two business days into a trust account and
the cash is used to pay the principal and interest on lease-backed notes as well
as any associated administrative expenses. The level of restricted cash is
impacted from one period to the next by the volume of leases pledged as
collateral on the lease-backed notes and timing of collections on such leases.
3. Capital Contributions
In fiscal 2002, the Sole Member made non-cash capital contributions to
the Company of $706,032 of office equipment leases or contracts and related
assets (the "Leases") and the reversal of income tax liability (see Notes 2 and
7). The Company was formed on October 9, 2001 and the Sole Member made an
initial capital contribution of $1 to the Company on March 5, 2002.
4. Servicing Agreement
The Company has a servicing agreement with IOSC pursuant to which IOSC
services the Leases and provides administrative services to the Company. The
servicing fee is calculated by multiplying 0.75% by the lesser of the discounted
present value of the Leases or the outstanding amount of the lease-backed notes
(see Note 6). The servicing fee expense was $1,365 for the period ended
September 30, 2002.
5. Investments in Leases
At September 30, 2002, contractual maturities of finance lease
receivables are as follows:
Net Investment
Leases Residual in Leases
-------------------------------------------------
2003 $ 213,221 $ 23,234 $ 236,455
2004 196,729 21,423 218,152
2005 145,809 15,878 161,687
2006 97,095 10,573 107,668
2007 15,303 1,666 16,969
2008 67 7 74
-------------------------------------------------
$ 668,224 $ 72,781 $ 741,005
Less unearned interest (125,169) (13,630) (138,799)
-------------------------------------------------
$ 543,055 $ 59,151 $ 602,206
=================================================
Residual values included in the investment in leases are paid by IKON at
the end of the lease. The equipment is then transferred to IKON.
F-7
6. Lease-Backed Notes
On May 30, 2002, the Company issued $634,800 of lease-backed notes (the
"Notes") pursuant to a shelf registration statement filed with the Securities
and Exchange Commission. The Notes are described below:
Principal
Amount
Principal Outstanding at Stated
Issuance Issuance September 30, Interest Maturity
Series Notes Date Amount 2002 Rate Date
------ ----- ---- ------ ---- ---- ----
2002-1 Class A-1 05/30/02 $ 171,000 $106,424 2.044% June 2003
Class A-2 05/30/02 46,000 46,000 2.91% February 2005
Class A-3 05/30/02 266,400 266,400 3.90% October 2006
Class A-4 05/30/02 151,400 151,400 4.68% November 2009
--------- --------
Total $ 634,800 $570,224
========= ========
The Notes were issued pursuant to an indenture ("Indenture") between the
Company, IOSC, and the Indenture trustee. The Notes are collateralized by a pool
of office equipment leases or contracts and related assets (the "Leases")
acquired or originated by IOSC (together with the equipment financing portion of
each periodic lease or rental payment due under the Leases on or after the
related indenture date) and all related casualty payments, retainable deposits,
and termination payments. Payments on the Notes are made from payments on the
Leases. The Notes have certain credit enhancement features available to
noteholders, including reserve accounts, overcollateralization accounts and
noncancelable insurance policies from Ambac Assurance Corporation with respect
to the Notes. On each payment date, funds available from the collection of lease
receivables will be paid to the noteholders in the order of their priority
class.
IOSC services the Leases and may delegate its servicing responsibilities to
one or more sub-servicers, but such delegation does not relieve IOSC of its
liabilities with respect thereto. IOSC retains possession of the Leases and
related files, and receives a monthly service fee from the Company for servicing
the Leases.
As of September 30, 2002, the Company had approximately $1,865,200
available under the $2,500,000 shelf registration statement.
Future maturities of the Notes, based on contractual maturities of the
Leases for each of the succeeding fiscal years, are as follows:
2002-1
Series Notes
------------
2003 $ 191,375
2004 178,300
2005 132,840
2006 67,709
------------
$ 570,224
============
7. Income Taxes
The components of the effective income tax rate were as follows:
Fiscal Year Ended
September 30,
2002
-----------------
Taxes at federal statutory rate 35.0%
State taxes, net of federal benefit 5.0
-------
Effective income tax rate 40.0%
-------
F-8
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Act of 1934, the registrant has duly caused this report on Form 10-K for the
Fiscal Year ended September 30, 2002 to be signed on its behalf by the
undersigned, thereunto duly authorized.
IKON RECEIVABLES FUNDING, LLC
Date: December 26, 2002
By: IKON RECEIVABLES FUNDING, INC.,
as Sole Member and Manager
By: /s/ Russell S. Slack
--------------------------
Name: Russell S. Slack
Title: President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report on Form 10-K has been signed below on December 26, 2002 by the
following persons on behalf of the registrant and in the capacities indicated.
Signatures Title
---------- -----
/s/ Russell S. Slack President, Director and
- ----------------------------- Principal Executive Officer
Russell S. Slack
/s/ Harry G. Kozee Vice President, Director and
- ----------------------------- Principal Financial Officer
Harry G. Kozee
/s/ Kathleen M. Burns Vice President, Director and
- ----------------------------- Treasurer
Kathleen M. Burns
Director
- -----------------------------
Robert C. Campbell
Director
- -----------------------------
Robert W. Grier
CERTIFICATIONS
I, Russell S. Slack, President and Principal Executive Officer of IKON
Receivables Funding, LLC, certify that:
1. I have reviewed this annual report on Form 10-K, and all reports on
Form 8-K containing distribution or servicing reports filed in respect
of periods included in the year covered by this annual report, of IKON
Receivables Funding, LLC;
2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading as of the last day of the period covered by this annual
report;
3. Based on my knowledge, the servicing information required to be
provided to the trustee by the servicer under the pooling and servicing
agreement is included in these reports;
4. I am responsible for reviewing the activities performed by the
servicer under the pooling and servicing agreement and based upon the
review required under the pooling and servicing agreement, and except
as disclosed in the report, the servicer has fulfilled its obligations
under the servicing agreement; and
5. I have disclosed to the registrant's certified public accountants
all significant deficiencies relating to the servicer's compliance with
the minimum servicing standards in accordance with a review conducted
in compliance with the Uniform Single Attestation Program for Mortgage
Brokers or similar standard as set forth in the pooling and servicing
agreement.
Date: December 26, 2002
/s/ Russell S. Slack
Russell S. Slack
President and Principal Executive Officer
CERTIFICATIONS
I, Harry G. Kozee, Vice President - Finance, Principal Financial Officer, and
Principal Accounting Officer of IKON Receivables Funding, LLC, certify that:
1. I have reviewed this annual report on Form 10-K, and all reports on
Form 8-K containing distribution or servicing reports filed in respect
of periods included in the year covered by this annual report, of IKON
Receivables, LLC;
2. Based on my knowledge, the information in these reports, taken as a
whole, does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading as of the last day of the period covered by this annual
report;
3. Based on my knowledge, the servicing information required to be
provided to the trustee by the servicer under the pooling and servicing
agreement is included in these reports;
4. I am responsible for reviewing the activities performed by the
servicer under the pooling and servicing agreement and based upon the
review required under the pooling and servicing agreement, and except
as disclosed in the report, the servicer has fulfilled its obligations
under the servicing agreement; and
5. I have disclosed to the registrant's certified public accountants
all significant deficiencies relating to the servicer's compliance with
the minimum servicing standards in accordance with a review conducted
in compliance with the Uniform Single Attestation Program for Mortgage
Brokers or similar standard as set forth in the pooling and servicing
agreement.
Date: December 26, 2002
/s/ Harry G. Kozee
Harry G. Kozee
Vice President - Finance, Principal Financial Officer,
and Principal Accounting Officer