UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION
15(d) OF THE SECURITIES
EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the transition period from ______________ to _________________.
Commission file number 1-5964
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
IKON OFFICE SOLUTIONS, INC. RETIREMENT SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
IKON OFFICE SOLUTIONS, INC., P.O. BOX 834, VALLEY FORGE, PA 19482-0834
REQUIRED INFORMATION
a. Financial Statements.
The following financial statements are furnished for the Plan.
1. Audited Statements of Net Assets Available for Benefits - December
31, 2002 and 2001
2. Audited Statements of Changes in Net Assets Available for Benefits
for the years ended December 31,
2002 and 2001
3. Notes to Financial Statements
4. Supplemental Schedules
(a) Schedule of Assets (Held at End of Year)
(b) Schedule of Reportable Transactions
b. Exhibits
Exhibit 23(a) Consent of PricewaterhouseCoopers LLP - Independent Accountants
IKON Office Solutions, Inc.
Retirement Savings Plan
Financial Statements and Supplemental Schedules
December 31, 2002 and 2001
IKON Office Solutions, Inc. Retirement Savings Plan
Index to Financial Statements and Supplemental Schedules
December 31, 2002 and 2001
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Page(s)
Financial Statements:
Report of Independent Auditors 1
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4 - 10
Supplemental Schedules:*
Schedule I - Schedule of Assets (Held at End of Year) 11
Schedule II - Schedule of Reportable Transactions 12
* Other schedules required by Section 2520.103-10 of the Department of Labor
Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974 have been omitted because they are
not applicable.
Report of Independent Auditors
To the Participants and Administrator of the
IKON Office Solutions, Inc. Retirement Savings Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the IKON Office Solutions, Inc. Retirement Savings Plan (the "Plan") at
December 31, 2002 and 2001, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits 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 audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedules of assets
(held at end of year) and reportable transactions are presented for the purpose
of additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. These supplemental schedules are the
responsibility of the Plan's management. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
Philadelphia, PA
June 19, 2003
IKON Office Solutions, Inc. Retirement Savings Plan
Statements of Net Assets Available for Benefits
December 31, 2002 and 2001
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2002 2001
Assets:
Investments, at fair value $411,711,929 $551,512,616
----------------- -----------------
Receivables:
Investment income receivable 339,657 12,889
Receivable for investments sold 438,806 1,430,499
Contributions receivable 5,502,293 -
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Total receivables 6,280,756 1,443,388
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Total assets 417,992,685 552,956,004
----------------- -----------------
Liabilities:
Accrued administrative expenses 603,060 481,453
Payable for investments purchased 1,664,483 1,650,503
Payable to Georgia Pacific 401(k) Plan (Note 9) - 151,357
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Total liabilities 2,267,543 2,283,313
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Net assets available for benefits $415,725,142 $550,672,691
----------------- -----------------
The accompanying notes are an integral part of these financial statements.
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IKON Office Solutions, Inc. Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
For the Years Ended December 31, 2002 and 2001
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2002 2001
Additions:
Investment income:
Net (depreciation) appreciation in fair value of investments $(141,909,776) $234,011,544
Interest and dividends 8,656,558 6,623,168
Shareholder litigation settlement (Note 9) - 1,963,046
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(133,253,218) 242,597,758
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Contributions:
Participant 49,813,494 56,644,373
Employer 24,397,496 26,167,958
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74,210,990 82,812,331
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Total additions (59,042,228) 325,410,089
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Deductions:
Payment of benefits 71,464,560 50,147,270
Administrative expenses 4,440,761 4,478,530
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Total deductions 75,905,321 54,625,800
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Net (decrease) increase (134,947,549) 270,784,289
Net assets available for benefits:
Beginning of year 550,672,691 279,888,402
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End of year $415,725,142 $550,672,691
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The accompanying notes are an integral part of these financial statements.
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IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002 and 2001
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1. Description of the Plan
The following description of the IKON Office Solutions, Inc. Retirement
Savings Plan (the "Plan") provides only general information. Participants
should refer to the Plan document for a more complete description of the
Plan's provisions.
General
The Plan is a defined contribution plan covering all regular full-time and
part-time non-union employees, as defined by the Plan, of IKON Office
Solutions, Inc. (the "Company") and its domestic subsidiaries which adopt
the Plan.
Effective January 1, 2002, the IKON Office Solutions, Inc. Common Stock
Fund was designated as an Employee Stock Ownership Plan ("ESOP") under the
provisions of the Internal Revenue Code. Accordingly, participants are
allowed to elect to reinvest dividends in IKON common stock or receive a
cash payment. Additionally, any dividends that are reinvested in IKON
common stock are fully vested.
The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 ("ERISA").
Plan Administration
The Plan is administered by the IKON Office Solutions, Inc. Retirement
Plans Committee (the "Committee"). Deutsche Bank Trust Company Americas is
the trustee (the "Trustee") of the Plan and custodian of the Plan's assets.
The Committee and Trustee of the Plan are appointed by the Board of
Directors of the Company. Recordkeeping of the Plan is performed by Hewitt
Associates LLC.
Contributions
Each year, participants may contribute up to 16 percent of their annual
base pay plus commissions ("Compensation"), as defined by the Plan, in
multiples of one percent except for certain highly compensated participants
who may be subject to certain regulatory limitations. Participants may also
contribute amounts representing rollovers from other qualified plans. The
Company contributes an amount equal to two-thirds of the first 6% of the
Compensation that a participant contributes to the Plan. Employer matching
contributions are typically made in IKON Office Solutions, Inc. common
stock. Employees who have attained the age of 55 may redirect matching
contributions to, and invest new matching contributions to, any of the
other available investment options. Effective November 1, 2002,
participants who have been IKON employees for twenty-four months may elect
to redirect matching contributions in their accounts to, and invest new
matching contributions in, any of the other available investment options.
The Company funds the matching contribution quarterly to participants
employed or absent on qualified leave on the last day of the calendar
quarter. There is a one-year eligibility waiting period for Company
matching contributions for new employees. Effective January 1, 2003, the
employer match will decrease from two-thirds to one-half.
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IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002 and 2001
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Participant Accounts
Each participant's account is credited with the participant's contributions
and an allocation of (a) the Company contributions and (b) Plan earnings
and charged with an allocation of administrative expenses, if any.
Allocations are based on participant compensation or account balances, as
defined. The benefit to which a participant is entitled is the benefit that
can be provided from the participant's vested account.
Vesting
Participants are immediately vested in their contributions plus actual
earnings thereon. Vesting in the Company's matching portion of their
accounts plus actual earnings thereon is based on the following:
Years of service Vesting
Less than 2 years 0%
2 years 25%
3 years 50%
4 years 75%
5 years 100%
Participants are also fully vested in the Company's matching portion upon
retirement, position termination due to permanent shutdown of plant or
department, total and permanent disability, or death. Pursuant to the ESOP
designation, participants are fully vested in dividends on IKON common
stock.
Investment Options
Upon enrollment in the Plan, a participant may direct employee
contributions in one-percent increments in any of the following nine
investment options.
o IKON Office Solutions, Inc. Common Stock Fund
o Bank of America Small-Cap Equity Fund
o American Funds Group EuroPacific Growth Fund
o PBHG Growth Fund
o PIMCO Total Return Fund
o Vanguard Institutional Index Fund
o Vanguard Windsor II Fund
o Vanguard Retirement Savings Trust II
o Balanced Fund
The Balanced Fund allocates funds to the Vanguard Institutional Index Fund
and the Vanguard Retirement Savings Trust II.
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IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
Participants may change their investment options or transfer existing
account balances to other investment options daily, except for employer
matching contributions which are made in IKON Office Solutions, Inc. common
stock and may not be redirected by the participant to any of the other
available investment options until the attainment of age 55 or as described
below. As part of the settlement of an ERISA class-action lawsuit brought
against IKON and a number of individual defendants (Whetman et. al. vs.
IKON Office Solution, Inc.), the Company modified the Plan effective
November 1, 2002 in order to allow participants greater flexibility with
respect to investment of the Company's match portion of participants'
individual accounts. Under the settlement, employees who have been with the
Company for at least twenty-four months are permitted to place Company
matching contributions in investment options other than IKON common stock.
Participant Loans
Participants may borrow from their accounts a minimum of $1,000 up to a
maximum equal to the lesser of $50,000 or 50 percent of their vested
account balance. Loan terms may not exceed 5 years; however, loan terms may
extend up to 15 years for the purchase of a primary residence. Loans are
secured by the balance in the participant's account and bear interest,
which is set in the month the loan is made, at the prime lending rate as
published in the Wall Street Journal on the last Wednesday of the month
plus one percent. Principal and interest are paid ratably through payroll
deductions.
Payment of Benefits
Participants are entitled to receive a distribution equal to their vested
account balances upon death, retirement, termination, or permanent
disability. Participants may elect to receive benefits in either a lump-sum
payment, periodic installments limited in duration by the provisions of the
Plan, or by the purchase and delivery of a life annuity or qualified joint
and survivor annuity contract. Participants under the age of 59 1/2 may
make withdrawals from their accounts only from after-tax salary deferral
contributions. Participants under the age of 59 1/2 who have participated
in the Plan for at least five years may make withdrawals from their
accounts derived from employer matching contributions and earnings thereon.
Participants under the age of 59 1/2 who have not participated in the Plan
for five years may make withdrawals of all or any portion of their vested
interest derived from employer matching contributions which have been held
by the Plan for at least two full plan years. Any portion of vested assets
may be withdrawn by participants in the case of personal financial hardship
upon approval of the plan administrator. After reaching age 59 1/2
participants may make withdrawals of any portion of their vested assets at
any time without regard to financial hardship. Participants who terminate
their employment with a balance of less than $5,000 may receive a direct
lump-sum payment or rollover their balance into an eligible retirement
plan. Participants under the age of 59 1/2 who terminate their employment
with a balance greater than $5,000 may continue to maintain their account
within the Plan, receive a direct lump-sum payment, or rollover their
balance into an eligible retirement plan. Participants who take withdrawals
before reaching age 59-1/2 may be subject to penalties and taxes.
Forfeitures
During the years ended December 31, 2002 and 2001, $2,487,355 and
$3,983,590, respectively, of employer matching contributions were forfeited
by terminated employees before those amounts became vested. Such forfeited
amounts were used to reduce employer remittance of employee contributions.
At December 31, 2002 and 2001, there was $14,565 and $65,437, respectively,
of forfeited non-vested amounts.
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IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
Plan Expenses
Expenses incurred in connection with the administration of the Plan are
paid by the Plan, such as recordkeeping, trustee, administrative, and
professional fees.
2. Significant Accounting Policies
Basis of Accounting
The accompanying financial statements have been prepared on the accrual
basis of accounting.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Shares of registered
investment companies are valued at quoted market prices which represent the
net asset value of shares held by the Plan at year-end. The Common Stock
fund is valued at net unit value which is based upon the quoted market
price of common stock and the value of cash and cash equivalents held for
liquidity purposes. Participant loans are valued at cost which approximates
fair value. Common/collective funds are valued at net unit value as
determined by the Trustee.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on
the ex-dividend date.
Net appreciation (depreciation) on investments represents the sum of the
change in the difference between year-end market value and cost and the
difference between the proceeds received and the cost of investments sold.
Payment of Benefits
Benefits are recorded when paid.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of additions and deductions during the reporting period. Actual
results could differ from those estimates.
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IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
3. Investments
The following investments represent five percent or more of the Plan's net
assets:
December 31, 2002
IKON Office Solutions, Inc. Common Stock Fund (See Note 4) $ 189,491,458
Vanguard Retirement Savings Trust II 82,371,236
Vanguard Institutional Index Fund 50,646,113
December 31, 2001
IKON Office Solutions, Inc. Common Stock Fund (See Note 4) $ 321,627,672
Vanguard Retirement Savings Trust II 78,355,296
Vanguard Institutional Index Fund 65,230,501
During the years ended December 31, 2002 and 2001, the Plan's investments
(including gains and losses on investments bought and sold, as well as held
during the year) appreciated (depreciated) in value as follows:
2002 2001
Registered investment companies $(25,278,791) $ (20,446,561)
Common stock (116,630,985) 254,458,105
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$(141,909,776) $234,011,544
================== =================
-8-
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
4. Nonparticipant-Directed Investments
Employer matching contributions are made in IKON common stock invested in
the IKON Office Solutions, Inc. Common Stock Fund. Employer matching
contributions are non-participant directed and may only be redirected to
the other available investment options by the participants as described in
Note 1. Information about significant components of the changes in net
assets of the IKON Office Solutions, Inc. Common Stock Fund, which includes
both the non-participant directed portion of investments and the
participant directed portion of investments, is as follows:
2002 2001
Changes in net assets:
Net (depreciation) appreciation in fair value of investments $(116,630,985) $254,458,105
Dividends 4,298,312 4,636,138
Contributions 34,075,014 38,935,291
Payment of benefits (33,206,189) (22,243,744)
Administrative expenses (2,319,435) (2,126,994)
Transfer to other investment options (18,742,714) (15,787,395)
------------------ -----------------
$(132,525,997) $257,871,401
------------------ -----------------
5. Related Party Transactions
The Pyramid Fund, which is included in various investment options, is
managed by Deutsche Bank Trust Company Americas, the Custodian and Trustee
of the Plan. In addition, the Plan offers an investment in the IKON Office
Solutions, Inc. Common Stock fund as an investment option. The transactions
in these investments are party-in-interest transactions, which are exempt
from prohibited transaction rules.
6. Plan Termination
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. In the event of Plan
termination, participants will become 100 percent vested in their accounts.
7. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits per
the financial statements to the Plan's Form 5500:
2002 2001
Net assets available for benefits per the financial statements $415,725,142 $550,672,691
Amounts allocated to withdrawing participants (449,639) (1,057,371)
----------------- -----------------
Net assets available for benefits per Form 5500 $415,275,503 $549,615,320
----------------- -----------------
-9-
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements
December 31, 2002 and 2001
- --------------------------------------------------------------------------------
The following is a reconciliation of benefits paid to participants for the
year ended December 31, 2002 per the financial statements to the Form 5500:
Year Ended
December 31, 2002
Benefits paid to participants per the financial statements $ (71,464,560)
Add: Amounts allocated to withdrawing participants
at December 31, 2002 (449,639)
Less: Amounts allocated to withdrawing participants
at December 31, 2001 1,057,371
-----------------
Benefits paid to participants per Form 5500 $ (70,856,828)
-----------------
Amounts allocated to withdrawing participants are recorded on the Plan's
Form 5500 for benefit claims that have been processed and approved for
payment prior to December 31 but not yet paid as of that date.
8. Tax Status
The Internal Revenue Service has determined and informed the Company by a
letter dated September 20, 2002, that the Plan and related trust are
designed in accordance with applicable sections of the Internal Revenue
Code ("IRC"). The Plan has been amended since receiving the determination
letter. The Company believes that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
9. Litigation Settlement
A class action lawsuit filed against the Company on behalf of the Company's
shareholders was settled in 1999. During 2001, the Plan received $2,114,403
related to this settlement. The settlement was allocated proportionate to
the appropriate investment accounts in 2002. Of this amount, $151,357
representing the portion related to former Unisource employees was
transferred to the Georgia-Pacific 401(k) Plan in 2002.
-10-
IKON Office Solutions, Inc. Retirement Savings Plan Schedule I
Schedule of Assets (Held at End of Year) EIN # 230334400
Form 5500, Schedule H, Part IV, Line I
December 31, 2002
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Current
Identity of Issue Investment Type Cost Value
IKON Office Solutions, Inc. Common Stock Fund** Common Stock $ 252,990,952 $ 189,491,458
Bank of America Small-Cap Equity Fund Registered Investment Company 6,490,724
American Funds Group EuroPacific Growth Fund Registered Investment Company 15,293,766
PBHG Growth Fund Registered Investment Company 19,918,063
PIMCO Total Return Fund Registered Investment Company 16,990,747
Vanguard Institutional Index Fund Registered Investment Company 50,646,113
Vanguard Windsor II Fund Registered Investment Company 9,284,577
Vanguard Retirement Savings Trust II Fund Common/Collective Trust 82,371,236
Pyramid Directed Cash Fund* Common/Collective Trust 3,848,758
Participant loans Interest rates ranging from 5.25% to
10.5%, maturing between January 1,
2003 and January 1, 2018 17,376,487
------------------
$ 411,711,929
------------------
* Party-in-interest.
** Party-in-interest. Employer contributions included in this fund are
nonparticipant-directed as employer matching contributions are made in IKON
common stock.
-11-
IKON Office Solutions, Inc. Retirement Savings Plan Schedule II
Schedule of Reportable Transactions* EIN # 223739194
Form 5500, Schedule H, Line 4J
December 31, 2002
- ------------------------------------------------------------------------------------------------------------------------------------
Net
Description Number of Number Purchase Selling Cost of Gain or
Identity of Parties Involved of Assets Purchases of Sales Price Price Asset (Loss)
IKON Office Solutions, Inc.** Common Stock 153 97 $ 16,499,332 $ 35,895,796 $ 30,993,156 $4,902,640
-12-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed by the undersigned
thereunto duly authorized.
IKON OFFICE SOLUTIONS, INC.
RETIREMENT SAVINGS PLAN
Dated: June 30, 2003 By: /s/ ALLISTER H. MCCREE, JR.
----------------------------
Allister H. McCree, Jr.
Plan Administrator
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