IKON Office Solutions, Inc.
SEC FORM 10-K
SEPTEMBER 30, 1997
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 24, 1997
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual]report pursuant in Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended September 30, 1997 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 1-5964
IKON OFFICE SOLUTIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 23-0334400
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
BOX 834, VALLEY FORGE, PENNSYLVANIA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
Registrant's telephone number, including area code: (610) 296-8000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH
EXCHANGE ON WHICH
TITLE OF CLASS REGISTERED
Common Stock, no par value New York Stock Exchange
(with Preferred Share Purchase Rights) Philadelphia Stock
Exchange
Chicago Stock Exchange
Series BB Conversion Preferred Stock (Depositary Shares)New York Stock
Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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
---- ----
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 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]
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT AS OF DECEMBER 19, 1997 WAS APPROXIMATELY $3,490,314,157 BASED UPON
THE CLOSING SALES PRICE ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE OF
$26.4375 PER COMMON SHARE AND $64.25 PER DEPOSITARY SHARE OF SERIES BB
CONVERSION PREFERRED STOCK ON DECEMBER 19, 1997. FOR PURPOSES OF THE FOREGOING
SENTENCE ONLY, ALL DIRECTORS AND OFFICERS OF THE REGISTRANT AND THE TRUSTEES
OF THE REGISTRANT'S PENSION PLAN AND STOCK PURCHASE PLANS WERE ASSUMED TO BE
AFFILIATES.
THE NUMBER OF SHARES OF COMMON STOCK, NO PAR VALUE, OF THE REGISTRANT
OUTSTANDING AS OF DECEMBER 19, 1997 WAS 134,094,079.
DOCUMENTS INCORPORATED BY REFERENCE
PARTS I AND II--PORTIONS OF THE REGISTRANT'S ANNUAL REPORT TO SHAREHOLDERS
FOR FISCAL YEAR ENDED SEPTEMBER 30, 1997
PART III--PORTIONS OF THE REGISTRANT'S PROXY STATEMENT FOR THE 1998 ANNUAL
MEETING OF SHAREHOLDERS
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PART I
ITEM 1. BUSINESS.
IKON Office Solutions, Inc. ("IKON" or the "Company") was incorporated in
Ohio in 1952 and is the successor to a business incorporated in 1928. The
address of the Company's principal executive offices is P.O. Box 834, Valley
Forge, Pennsylvania 19482 (telephone number: (610) 296-8000).
IKON sells, rents and leases photocopiers, fax machines, digital printers
and other automated office equipment for use in both traditional and
integrated office environments, and provides equipment service and supplies
and equipment financing. IKON's business also includes outsourcing and imaging
services, such as mailroom and copy center management, specialized document
copying services and electronic imaging and file conversion. IKON also offers
network consulting and design, hardware and software product interfaces,
computer networking, technology training and software solutions for the
networked office environment, providing one-stop shopping to customers who
seek quality, accessible office productivity solutions.
IKON has over 1,100 locations in the United States, Canada, the United
Kingdom, Germany, France and Denmark. These locations comprise the largest
network of independent copier and office equipment dealers in North America
and in the United Kingdom. IKON competes against numerous competitors over a
wide range of markets, competing on the basis of quality, customer service,
price and product performance.
IKON distributes the products of numerous manufacturers, including Canon,
Oce, Ricoh and Sharp, throughout 50 states, eight Canadian provinces, in
Europe and in Mexico. IKON also distributes the products of Microsoft, IBM,
Lotus, Compaq and Hewlett-Packard in the United States and Canada. Customers
include large and small businesses, professional firms and government
agencies.
In fiscal 1997, IKON generated approximately $5.1 billion in revenues and
$261 million in operating income. Finance subsidiaries contributed 23.5% of
IKON's operating income in fiscal 1997.
During fiscal 1997, IKON acquired 89 companies in the United States, Canada,
and Europe, with an aggregate of approximately $528 million in annualized
trailing revenues. Of the 89 companies acquired in fiscal 1997, 34 were
traditional copier companies, 27 were outsourcing and imaging companies and 28
were technology services companies. IKON's international expansion during
fiscal 1997 included the acquisition of companies in Canada, the United
Kingdom, France and Germany.
INFORMATION CONCERNING IKON'S BUSINESS IN GENERAL
BUSINESS TRANSFORMATION
At the end of fiscal 1995, the Company began a transformation program
designed to change the organization into a more cohesive and integrated
network. The transformation involves a variety of activities that IKON
believes will lower administrative costs and improve margins. These activities
include the consolidation of purchasing, inventory control, logistics and
other activities into thirteen customer service centers in the United States,
establishment of a common information technology system, adoption of a common
name and creation of marketplace-focused field operations with greater
attention to customer sales and service.
In March 1997, IKON determined that it would accelerate the transformation
program, which was originally expected to be completed in fiscal 2000. The
Company now expects to complete its transformation program by the end of
fiscal 1998.
NAME CHANGE
Effective January 23, 1997, the Company's shareholders approved an amendment
to the Company's Articles of Incorporation to change the name of the
corporation from Alco Standard Corporation to IKON Office Solutions, Inc.
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UNISOURCE SPIN-OFF
In the third quarter of fiscal 1996, the Company announced that it would
distribute all of the common shares of Unisource Worldwide, Inc.
("Unisource"), its paper products and supply systems distribution subsidiary,
to the Company's common shareholders. Accordingly, the Company declared a
dividend payable to holders of record of the Company's common stock at the
close of business on December 13, 1996 (the "Record Date") of one share of
Unisource common stock, $.001 par value, for every two shares of the Company's
common stock owned on the Record Date. As a result of the distribution, 100%
of the outstanding shares of Unisource Common Stock were distributed to the
Company's shareholders on December 31, 1996 (the "Distribution Date"). Except
for any cash received in lieu of fractional shares, the Unisource spin-off was
tax-free to the Company and the Company's U.S. shareholders. Effective January
2, 1997, Unisource began operating as an independent publicly traded company.
In conjunction with the separation of their businesses, the Company and
Unisource entered into various agreements that address the allocation of
assets and liabilities between them and define their relationship after the
separation, including a Distribution Agreement, a Benefits Agreement and a Tax
Sharing and Indemnification Agreement, all of which have been filed as
exhibits to this report.
BOARD AND MANAGEMENT CHANGES
James R. Birle, Chairman of Resolute Partners, Inc., a private merchant
bank, was elected to the Board of Directors in November 1996, and Philip E.
Cushing, Group Chief Executive of Inchcape PLC, an international distribution
business, was elected to the Board in November 1997.
Among other executive changes during fiscal 1997, Kurt E. Dinkelacker, who
had been serving as President and Chief Operating Officer, assumed the
position of Executive Vice President and Chief Financial Officer. In addition,
Michael H. Dudek (Vice President--Acquisitions), William A. Brady (Vice
President--Law) and Beth Sexton (Vice President--Human Resources), were
appointed as corporate officers, and J. F. Quinn was named Treasurer.
DEBT OFFERING
In October 1997, IKON completed a public offering of $125 million seven-year
notes with a stated interest rate of 6.75% at a discount price of 99.132%, and
$125 million of thirty-year notes with a stated interest rate of 7.30% at a
discount price of 98.593%, and used the net proceeds of approximately $247
million to reduce outstanding short-term debt.
SUPPLIERS AND CUSTOMERS
Products distributed by IKON are purchased from numerous domestic and
overseas suppliers, primarily Canon, Oce, Ricoh and Sharp. There has been no
significant difficulty in obtaining products from these suppliers. Supplier
relationships are good and are expected to continue. IKON has a large number
of customers, and is not dependent upon a single customer, or a few customers,
the loss of any one or more of which would have a material adverse effect on
IKON's business taken as a whole.
Many of the Company's operations are required to carry significant amounts
of inventory to meet rapid delivery requirements of customers. At September
30, 1997, inventories accounted for approximately 21% of IKON's total current
assets.
PROPRIETARY MATTERS
The Company has a number of trademarks, trade names and service marks which
the Company uses in the conduct of its business. However, except for the "IKON
Office Solutions" and "IKON" designations, the
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Company does not believe that any single name, trademark, trade name or
service mark is material to its business taken as a whole. A number of parties
have brought claims against the Company alleging that its use of the "IKON
Office Solutions" designation infringes upon certain proprietary rights. The
Company believes that such claims are without merit and is vigorously
defending its use of the designation.
ENVIRONMENTAL REGULATION
IKON is engaged in distribution and services businesses which do not
generate significant hazardous wastes. Some of IKON's distribution facilities
have tanks for storage of diesel fuel and other petroleum products which are
subject to laws regulating such storage tanks. Federal, state and local
provisions relating to the protection of the environment have not had and are
not expected to have a material adverse effect upon the Company's capital
expenditures, liquidity, earnings or competitive position. Certain
environmental claims, however, are now pending against the Company for
manufacturing or landfill sites relating to predivestiture activities of
discontinued manufacturing operations. While it is not possible to estimate
what expenditures may be required in order for the Company to comply with
environmental laws or discharge environmental liabilities in the future, the
Company does not believe that such expenditures will have a material adverse
effect on it or its operations as a whole.
EMPLOYEES
At September 30, 1997, IKON had approximately 41,000 employees. IKON
believes its relations with its employees are good.
FOREIGN OPERATIONS
IKON has operations in Canada, Mexico, the United Kingdom, Germany, France
and Denmark. Information concerning revenues, income before taxes and
identifiable assets of the Company's foreign continuing operations for each of
the three years in the period ended September 30, 1997 set forth in note 14 to
the consolidated financial statements (included on page 32 of the Company's
1997 Annual Report to Shareholders ("1997 Annual Report")) is incorporated
herein by reference. Revenues from exports during the last three fiscal years
were not significant.
There are additional risks attendant to foreign operations, such as possible
currency fluctuations and unsettled political conditions.
ITEM 2. PROPERTIES.
At September 30, 1997, IKON owned or leased approximately 1,100 facilities
in 50 states, eight Canadian provinces, in Europe and in Mexico, of which
approximately 2% are owned and 98% are leased under lease agreements with
various expiration dates. These properties occupy a total of approximately 9.2
million square feet. IKON believes that its facilities are suitable and
adequate for the purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS.
A number of ordinary course legal proceedings are pending against the
Company. There are also a number of claims against the Company alleging that
its use of the "IKON Office Solutions" and "IKON" designations infringes upon
certain proprietary rights. Except for these proprietary rights claims (which
the Company believes will be resolved in a manner which will not have a
material adverse effect on the Company), there are no material pending legal
proceedings to which the Company is a party (or to which any of its property
is subject), and to the Company's knowledge, no material legal proceedings are
contemplated by governmental authorities against the Company or any of its
properties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(No response to this item is required.)
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3
EXECUTIVE OFFICERS OF IKON
The following is a list of the Company's executive officers, their ages and
their positions for the last five years. Unless otherwise indicated, positions
shown are with IKON or its subsidiaries.
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NAME AGE POSITION AND YEARS SERVED
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John E. Stuart.......... 53 Chairman (1995-Present), Chief Executive Officer (1993-
Present), and a director (1993-Present); President (1993-
1996); Vice President (1989-1993)
William F. Drake, Jr. .. 65 General Counsel (1996-Present), Vice Chairman (1984-
1996), and a director (1969-Present); Of Counsel (1996-
Present), Partner (1984-1996), Montgomery, McCracken,
Walker & Rhoads
Kurt E. Dinkelacker..... 44 Executive Vice President and Chief Financial Officer
(1997-Present; 1993-1995); President (1995-1997) and
Chief Operating Officer (1996-1997) (also a member of the
Finance Committee of Crozer-Keystone Health System)
James J. Forese......... 61 Executive Vice President and President of International
Operations (1996-Present); Chief Operating Officer (1996-
1996), and a director (1994-1996); General Manager, IBM
Customer Financing, and Chairman, IBM Credit Corporation
(1993-1996)
David M. Gadra.......... 49 Senior Vice President and Chief Information Officer
(1996-Present); Manager, General Electric Corporation
Corporate Information Services (1992-1996)
O. Gordon Brewer, Jr. .. 61 Vice President--Finance (1986-Present)
Michael J. Dillon ...... 44 Vice President (1994-Present) and Controller (1993-
Present); Group Controller, Office Products Group (1991-
1993)
Michael H. Dudek........ 41 Vice President-Acquisitions (1993-Present); Director of
Financial Operations, Office Products Group (1991-1993)
William A. Brady........ 46 Vice President-Law (1996-Present); Vice President and
General Counsel, Office Products Group (1994-1996); Group
Counsel, Office Products Group (1984-1994)
Beth B. Sexton.......... 41 Vice President--Human Resources (1996-Present); Human
Resources Director, Americas, CH2M Hill (1993-1996)
Karin M. Kinney......... 37 Corporate Secretary (1996-Present) and Corporate Counsel
(1992-Present); Counsel (1990-1992)
J. F. Quinn............. 42 Treasurer (1997-Present); Assistant Treasurer (1996-
1997); Manager, Foreign Exchange and Cash Management
(1994-1996); Manager, Foreign Exchange, ARCO Chemical
Company (1991-1994)
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The New York Stock Exchange is the principal market on which the Company's
common stock is traded (ticker symbol IKN). IKON's common stock is also traded
on the Philadelphia and Chicago Stock Exchanges. As of December 19, 1997,
there were approximately 14,980 holders of record of IKON's common stock. The
information regarding the quarterly market price ranges of IKON's common stock
and dividend payments under "Quarterly Financial Summary" on page 37 of the
1997 Annual Report is incorporated herein by reference.
IKON anticipates that it will pay a quarterly dividend of $.04 per common
share in March 1998. The Company currently expects to continue its policy of
paying regular cash dividends, although there can be no assurance as to future
dividends because they are dependent upon future operating results, capital
requirements and financial condition and may be limited by covenants in
certain loan agreements.
ITEM 6. SELECTED FINANCIAL DATA.
Information appearing under "Corporate Financial Summary" for fiscal 1993
through 1997 regarding revenues, income from continuing operations, income
from continuing operations per common share, total assets, total debt, serial
preferred stock and cash dividends per common share on pages 38 and 39 of the
1997 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Information appearing under "Financial Review" on pages 33 through 36 of the
1997 Annual Report is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Information appearing under "Market Risk" on page 36 of the 1997 Annual
Report is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The Report of Independent Auditors and Consolidated Financial Statements of
IKON and its subsidiaries on pages 18 through 33 and the information appearing
under "Quarterly Financial Summary" for fiscal 1997 and 1996 on page 37 of the
1997 Annual Report are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
(No response to this item is required)
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors appearing in IKON's Notice of Annual Meeting
of Shareholders and Proxy Statement for the January 22, 1998 annual meeting of
shareholders (the "1998 Proxy Statement") is incorporated herein by reference.
Information regarding executive officers is set forth in Part I of this report
and additional information regarding executive officers appearing under
"Executive Compensation" in the 1998 Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under "Executive Compensation" in the 1998 Proxy
Statement is incorporated herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management appearing under "Security Ownership" in the 1998 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under "Certain Transactions" in the 1998 Proxy
Statement is incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) List of Financial Statements and Financial Statement
Schedules.
The response to this portion of Item 14 is submitted on page S-1 hereof as a
separate section of this report.
(a) (3) List of Exhibits.*
The following exhibits are filed as a part of this report (listed by numbers
corresponding to the Exhibit Table of Item 601 in Regulation S-K):
3.1 Amended and Restated Articles of Incorporation.
3.2 Code of Regulations of IKON, filed as Exhibit 3.2 to IKON's
Form 10-Q for the quarter ended March 31, 1996, is incorporated
herein by reference.
4.1 Credit Agreement, dated December 16, 1996, among IKON and
various institutional lenders, with CoreStates Bank, N.A., as
Agent, filed as Exhibit 4.1 to IKON's 1996 Form 10-K, is
incorporated herein by reference.
4.2 Credit Agreement among IKON, certain of its subsidiaries,
various banks and Deutsche Bank AG, New York Branch, as Agent,
dated as of August 30, 1996. Amendment 1 to Credit Agreement,
dated as of April 1, 1997.
4.3 Credit Agreement dated as of October 13, 1995 among IKON Office
Solutions, Inc., an Ontario corporation (formerly Alco Office
Systems Canada), Deutsche Bank Canada, Chemical Bank of Canada
and Royal Bank of Canada, filed as Exhibit 4.5 to IKON's 1995
Form 10-K, is incorporated herein by reference.
4.4 Note Purchase Agreement between IKON and various purchasers
dated July 15, 1995 for $55 million in 7.15% Notes due November
15, 2005, filed as Exhibit 4.9 to IKON's 1995 Form 10-K, is
incorporated herein by reference.
4.5 Pursuant to Regulation S-K item 601(b)(iii), IKON agrees to
furnish to the Commission, upon request, a copy of other
instruments defining the rights of holders of long-term debt of
IKON and its subsidiaries.
10.1 Distribution Agreement between IKON and Unisource dated as of
November 20, 1996, filed as Exhibit 2.1 to Unisource's
Registration Statement on Form 10 (effective November 26,
1996), is incorporated herein by reference.
10.2 Tax Sharing and Indemnification Agreement between IKON and
Unisource dated as of November 20, 1996, filed as Exhibit 10.1
to Unisource's Registration Statement on Form 10 (effective
November 26, 1996), is incorporated herein by reference.
10.3 Benefits Agreement between IKON and Unisource dated as of
November 20, 1996, filed as Exhibit 10.5 to Unisource's
Registration Statement on Form 10 (effective November 26,
1996), is incorporated herein by reference.
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10.4 Support Agreement dated as of October 22, 1996 between IKON and
IKON Capital, Inc. (IKON's leasing subsidiary), filed as
Exhibit 10.4 to IKON Capital, Inc.'s Form 8-K dated October 22,
1996, is incorporated herein by reference.
10.5 Amended and Restated Receivables Transfer Agreement dated as of
March 31, 1997 among IKON Funding, Inc., IKON Capital, Inc.,
Twin Towers, Inc. and Deutsche Bank AG, New York Branch.
10.6 First Tier Transfer Agreement, dated as of March 31, 1997,
between IKON Capital, Inc. and IKON Funding, Inc.
10.7 Receivables Transfer Agreement dated as of September 30, 1996
among IKON Funding, Inc., IKON Capital, Inc., Old Line Funding
Corp. and Royal Bank of Canada, filed as Exhibit 10.5 to IKON's
1996 Form 10-K, is incorporated herein by reference. Amendment
1 to Receivables Transfer Agreement, dated as of October 7,
1997.
10.8 Transfer Agreement dated as of September 30, 1996 between IKON
Capital, Inc. and IKON Funding, Inc., filed as Exhibit 10.6 to
IKON's 1996 Form 10-K, is incorporated herein by reference.
10.9 Indenture dated as of December 11, 1995 between IKON and First
Union Bank, N.A., as Trustee, filed as Exhibit 4 to IKON's
Registration Statement No. 33-64177, is incorporated herein by
reference.
10.10 Indenture dated as of July 1, 1995 between IKON Capital, Inc.
and Chase Manhattan Bank, N.A. (formerly Chemical Bank, N.A.),
as Trustee, filed as Exhibit 10.8 to IKON's 1996 Form 10-K, is
incorporated herein by reference.
10.11 Indenture dated as of July 1, 1994 between IKON Capital, Inc.
and NationsBank, N.A., as Trustee, filed as Exhibit 4 to IKON
Capital, Inc.'s Registration Statement No. 33-53779, is
incorporated herein by reference.
10.12 Indenture dated as of April 1, 1986 between IKON and the Chase
Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to
IKON's Registration Statement No. 30-4829, is incorporated
herein by reference.
10.13 Distribution Agreement dated as of June 4, 1997 between IKON
Capital, Inc. and various distribution agents.
10.14 Distribution Agreement dated as of June 30, 1995 between IKON
Capital, Inc. and various distribution agents, filed as Exhibit
10.21 to IKON's 1995 Form 10-K, is incorporated herein by
reference.
10.15 Distribution Agreement dated July 1, 1994, filed as Exhibit 1
to IKON Capital Inc.'s Form 10-Q for the quarter ended June 30,
1994, is incorporated herein by reference.
10.16 Maintenance Agreement dated as of August 15, 1991 between IKON
and IKON Capital, Inc., filed as Exhibit 10.2 to IKON Capital,
Inc.'s Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference.
10.17 Operating Agreement dated as of August 15, 1991 between IKON
and IKON Capital, Inc., filed as Exhibit 10.3 to IKON Capital,
Inc.'s Registration Statement on Form 10 dated May 4, 1994, is
incorporated herein by reference.
10.18 Rights Agreement dated as of February 10, 1988 between IKON and
National City Bank, filed on February 11, 1988 as Exhibit 1 to
IKON's Registration Statement on Form 8-A, as amended by an
Amended and Restated Rights Agreement dated as of June 18,
1997, filed as Exhibit 4.1 to IKON's Form 8-K dated June 18,
1997, is incorporated herein by reference.
10.19 Amended and Restated Long Term Incentive Compensation Plan,
filed as Exhibit 10.1 to IKON's Form 10-Q for the quarter ended
March 31, 1996, is incorporated herein by reference.**
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10.20 Annual Bonus Plan, filed as Exhibit 10.3 to IKON's 1994 Form
10-K, is incorporated herein by reference.**
10.21 IKON Office Solutions, Inc. Partners' Stock Purchase Plan**
10.22 1986 Stock Option Plan, filed as Exhibit 10.6 to IKON's 1995
Form 10-K, is incorporated herein by reference.**
10.23 1995 Stock Option Plan, filed as Exhibit 10.5 to IKON's Form
10-Q for the quarter ended March 31, 1996, is incorporated
herein by reference.**
10.24 Non-Employee Directors Stock Option Plan.**
10.25 Executive Employment Contracts--John E. Stuart, Kurt E.
Dinkelacker, and David M. Gadra.**
10.26 Form of Change in Control Agreement--William F. Drake, Jr.,
James J. Forese, and David M. Gadra.**
10.27 1980 Deferred Compensation Plan, filed as Exhibit 10.7 to
IKON's 1992 Form 10-K, is incorporated herein by reference.**
10.28 1985 Deferred Compensation Plan, filed as Exhibit 10.8 to
IKON's 1992 Form 10-K, is incorporated herein by reference.**
10.29 1991 Deferred Compensation Plan, filed as Exhibit 10.9 to
IKON's 1992 Form 10-K, is incorporated herein by reference.**
10.30 1994 Deferred Compensation Plan.**
10.31 Executive Deferred Compensation Plan.**
11 Statement re: Computation of Earnings per Share.
12.1 Ratio of Earnings to Fixed Charges.
12.2 Ratio of Earnings to Fixed Charges Excluding Captive Finance
Subsidiaries.
12.3 Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends.
12.4 Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends Excluding Captive Finance Subsidiaries.
13 Financial Section of IKON's Annual Report to Shareholders for
the fiscal year ended September 30, 1997 (which, except for
those portions thereof expressly incorporated herein by
reference, is furnished for the information of the Commission
and is not "filed" as part of this report).
21 Subsidiaries of IKON.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of
Attorney.
27 Financial Data Schedule.
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* Copies of the exhibits will be furnished to any security holder of IKON
upon payment of the reasonable cost of reproduction.
**Management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
On July 17, 1997, the Company filed a Current Report on Form 8-K to file,
under Item 5 of the form, information contained in its press release dated
July 17, 1997 concerning IKON's earnings for the fiscal quarter ended June 30,
1997.
On October 22, 1997, the Company filed a Current Report on Form 8-K to file,
under Item 5 of the form, information contained in its press release dated
October 15, 1997 concerning IKON's earnings for the fiscal quarter and fiscal
year ended September 30, 1997.
(c) The response to this portion of Item 14 is submitted in response to Item
14(a)(3) above.
(d) The response to this portion of Item 14 is contained on page F-1 of this
report.
8
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 the Company believes the expectations contained in
such forward-looking statements are reasonable, no assurances can be given
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 uncertainties and risks that could significantly affect current
plans, anticipated actions and the Company's future financial condition and
results. These uncertainties and risks include, but are not limited to, those
relating to successfully managing an aggressive program to acquire and
integrate new companies, including companies with technical services and
products that are relatively new to the Company, and also including companies
outside the United States, which present additional risks relating to
international operations; risks and uncertainties relating to conducting
operations in a competitive environment; delays, difficulties, technological
changes, management transitions and employment issues associated with a large-
scale transformation project; debt service requirements (including sensitivity
to fluctuation in interest rates); and general economic conditions. As a
consequence, 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.
9
IKON OFFICE SOLUTIONS, INC. AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
ITEMS 14(A)(1) AND (2) AND 14(D)
LIST OF FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS: The following consolidated financial statements of
IKON Office Solutions, Inc. and its subsidiaries included in the 1997 Annual
Report to Shareholders are incorporated by reference in Item 8 of Part II of
this report:
Consolidated Statements of Income
--Fiscal years ended September 30, 1997, September 30, 1996 and
September 30, 1995
Consolidated Balance Sheets
--September 30, 1997 and September 30, 1996
Consolidated Statements of Cash Flows
--Fiscal years ended September 30, 1997, September 30, 1996 and
September 30, 1995
Consolidated Statements of Changes in Shareholders' Equity
--Fiscal years ended September 30, 1997, September 30, 1996 and
September 30, 1995
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES: The following consolidated financial
statement schedule of IKON Office Solutions, Inc. and its subsidiaries is
submitted in response to Item 14(d):
Schedule II--Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been
omitted.
F-1
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, 1997 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.
Ikon Office Solutions, Inc.
Date: December 24, 1997
/s/ Michael J. Dillon
By____________________________________
(MICHAEL J. DILLON) VICE
PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT ON FORM 10-K HAS BEEN SIGNED BELOW ON DECEMBER 24, 1997 BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
SIGNATURES TITLE
*John E. Stuart Chairman and Chief Executive
- ------------------------------------ Officer (Principal Executive
(JOHN E. STUART) Officer)
/s/ Kurt E. Dinkelacker Executive Vice President, Chief
- ------------------------------------ Financial Officer and a Director
(KURT E. DINKELACKER) (Principal Financial Officer)
/s/ Michael J. Dillon Vice President and Controller
- ------------------------------------ (Principal Accounting Officer)
(MICHAEL J. DILLON)
*James R. Birle Director
- ------------------------------------
(JAMES R. BIRLE)
*Philip E. Cushing Director
- ------------------------------------
(PHILIP E. CUSHING)
*William F. Drake, Jr. Vice Chairman, General Counsel and
- ------------------------------------ a Director
(WILLIAM F. DRAKE, JR.)
*Frederick S. Hammer Director
- ------------------------------------
(FREDERICK S. HAMMER)
*Barbara Barnes Hauptfuhrer Director
- ------------------------------------
(BARBARA BARNES HAUPTFUHRER)
*Richard A. Jalkut Director
- ------------------------------------
(RICHARD A. JALKUT)
*By his signature set forth below, Michael J. Dillon, pursuant to duly
executed Powers of Attorney duly filed with the Securities and Exchange
Commission, has signed this Form 10-K on behalf of the persons whose signatures
are printed above, in the capacities set forth opposite their respective names.
/s/ Michael J. Dillon December 24, 1997
- ------------------------------------
(MICHAEL J. DILLON)
IKON OFFICE SOLUTIONS, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
ADDITIONS
-----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS-- DEDUCTIONS-- BALANCE AT
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE END OF PERIOD
----------- ------------ ----------- ----------- ------------ -------------
YEAR ENDED SEPTEMBER 30,
1997
- ------------------------
Allowance for doubtful
accounts............... $35,308,000 $25,724,000 $ 3,755,000(1) $10,595,000(2) $54,192,000
YEAR ENDED SEPTEMBER 30,
1996
- ------------------------
Allowance for doubtful
accounts............... $32,856,000 $18,296,000 $ 6,634,000(1) $22,478,000(2) $35,308,000
YEAR ENDED SEPTEMBER 30,
1995
- ------------------------
Allowance for doubtful
accounts............... $13,494,000 $ 8,940,000 $17,062,000(1) $ 6,640,000(2) $32,856,000
- --------
(1)Represents beginning balances of acquired companies.
(2) Accounts written off during year, net of recoveries.
S-1
IKON OFFICE SOLUTIONS, INC.
P.O. BOX 834
VALLEY FORGE, PENNSYLVANIA 19482-0834
(610) 296-8000
IKON OFFICE SOLUTIONS, INC.
INDEX TO EXHIBITS
EXHIBIT NO. TITLE PAGE
----------- ----- ----
3.1 Amended and Restated Articles of Incorporation.............
3.2 Code of Regulations of IKON, filed as Exhibit 3.2 to IKON's
Form 10-Q for the quarter ended March 31, 1996, is
incorporated herein by reference. .........................
4.1 Credit Agreement, dated December 16, 1996, among IKON and
various institutional lenders, with CoreStates Bank, N.A.,
as Agent, filed as Exhibit 4.1 to IKON's 1996 Form 10-K, is
incorporated herein by reference...........................
4.2 Credit Agreement among IKON, certain of its subsidiaries,
various banks and Deutsche Bank AG, New York Branch, as
Agent, dated as of August 30, 1996. Amendment 1 to Credit
Agreement, dated as of April 1, 1997.......................
4.3 Credit Agreement dated as of October 13, 1995 among IKON
Office Solutions, Inc., an Ontario corporation (formerly
Alco Office Systems Canada), Deutsche Bank Canada, Chemical
Bank of Canada and Royal Bank of Canada, filed as Exhibit
4.5 to IKON's 1995 Form 10-K, is incorporated herein by
reference..................................................
4.4 Note Purchase Agreement between IKON and various purchasers
dated July 15, 1995 for $55 million in 7.15% Notes due
November 15, 2005, filed as Exhibit 4.9 to IKON's 1995 Form
10-K, is incorporated herein by reference..................
4.5 Pursuant to Regulation S-K item 601(b)(iii), IKON agrees to
furnish to the Commission, upon request, a copy of other
instruments defining the rights of holders of long-term
debt of IKON and its subsidiaries..........................
10.1 Distribution Agreement between IKON and Unisource dated as
of November 20, 1996, filed as Exhibit 2.1 to Unisource's
Registration Statement on Form 10 (effective November 26,
1996), is incorporated herein by reference.................
10.2 Tax Sharing and Indemnification Agreement between IKON and
Unisource dated as of November 20, 1996, filed as Exhibit
10.1 to Unisource's Registration Statement on Form 10
(effective November 26, 1996), is incorporated herein by
reference. ................................................
10.3 Benefits Agreement between IKON and Unisource dated as of
November 20, 1996, filed as Exhibit 10.5 to Unisource's
Registration Statement on Form 10 (effective November 26,
1996), is incorporated herein by reference. ...............
10.4 Support Agreement dated as of October 22, 1996 between IKON
and IKON Capital, Inc. (IKON's leasing subsidiary), filed
as Exhibit 10.4 to IKON Capital, Inc.'s Form 8-K dated
October 22, 1996, is incorporated herein by reference......
10.5 Amended and Restated Receivables Transfer Agreement dated
as of March 31, 1997 among IKON Funding, Inc., IKON
Capital, Inc., Twin Towers, Inc. and Deutsche Bank AG, New
York Branch. ..............................................
10.6 First Tier Transfer Agreement, dated as of March 31, 1997,
between IKON Capital, Inc. and IKON Funding, Inc...........
10.7 Receivables Transfer Agreement dated as of September 30,
1996 among IKON Funding, Inc., IKON Capital, Inc., Old Line
Funding Corp. and Royal Bank of Canada, filed as Exhibit
10.5 to IKON's 1996 Form 10-K, is incorporated herein by
reference. Amendment 1 to Receivables Transfer Agreement,
dated as of October 7, 1997. ..............................
10.8 Transfer Agreement dated as of September 30, 1996 between
IKON Capital, Inc. and IKON Funding, Inc., filed as Exhibit
10.6 to IKON's 1996 Form 10-K, is incorporated herein by
reference..................................................
EXHIBIT NO. TITLE PAGE
----------- ----- ----
10.9 Indenture dated as of December 11, 1995 between IKON and
First Union Bank, N.A., as Trustee, filed as Exhibit 4 to
IKON's Registration Statement No. 33-64177, is
incorporated herein by reference. ........................
10.10 Indenture dated as of July 1, 1995 between IKON Capital,
Inc. and Chase Manhattan Bank, N.A. (formerly Chemical
Bank, N.A.), as Trustee, filed as Exhibit 10.8 to IKON's
1996 Form 10-K, is incorporated herein by reference.......
10.11 Indenture dated as of July 1, 1994 between IKON Capital,
Inc. and NationsBank, N.A., as Trustee, filed as Exhibit 4
to IKON Capital, Inc.'s Registration Statement No. 33-
53779, is incorporated herein by reference................
10.12 Indenture dated as of April 1, 1986 between IKON and the
Chase Manhattan Bank, N.A., as Trustee, filed as Exhibit
4.1 to IKON's Registration Statement No. 30-4829, is
incorporated herein by reference..........................
10.13 Distribution Agreement dated as of June 4, 1997 between
IKON Capital, Inc. and various distribution agents. ......
10.14 Distribution Agreement dated as of June 30, 1995 between
IKON Capital, Inc. and various distribution agents, filed
as Exhibit 10.21 to IKON's 1995 Form 10-K, is incorporated
herein by reference.......................................
10.15 Distribution Agreement dated July 1, 1994, filed as
Exhibit 1 to IKON Capital Inc.'s Form 10-Q for the quarter
ended June 30, 1994, is incorporated herein by
reference. ...............................................
10.16 Maintenance Agreement dated as of August 15, 1991 between
IKON and IKON Capital, Inc., filed as Exhibit 10.2 to IKON
Capital, Inc.'s Registration Statement on Form 10 dated
May 4, 1994, is incorporated herein by reference. ........
10.17 Operating Agreement dated as of August 15, 1991 between
IKON and IKON Capital, Inc., filed as Exhibit 10.3 to IKON
Capital, Inc.'s Registration Statement on Form 10 dated
May 4, 1994, is incorporated herein by reference. ........
10.18 Rights Agreement dated as of February 10, 1988 between
IKON and National City Bank, filed on February 11, 1988 as
Exhibit 1 to IKON's Registration Statement on Form 8-A, as
amended by an Amended and Restated Rights Agreement dated
as of June 18, 1997, filed as Exhibit 4.1 to IKON's Form
8-K dated June 18, 1997, is incorporated herein by
reference. ...............................................
10.19 Amended and Restated Long Term Incentive Compensation
Plan, filed as Exhibit 10.1 to IKON's Form 10-Q for the
quarter ended March 31, 1996, is incorporated herein by
reference.**..............................................
10.20 Annual Bonus Plan, filed as Exhibit 10.3 to IKON's 1994
Form 10-K, is incorporated herein by reference.**.........
10.21 IKON Office Solutions, Inc. Partners' Stock Purchase
Plan**....................................................
10.22 1986 Stock Option Plan, filed as Exhibit 10.6 to IKON's
1995 Form 10-K, is incorporated herein by reference.**....
10.23 1995 Stock Option Plan, filed as Exhibit 10.5 to IKON's
Form 10-Q for the quarter ended March 31, 1996, is
incorporated herein by reference.**.......................
10.24 Non-Employee Directors Stock Option Plan.**...............
10.25 Executive Employment Contracts--John E. Stuart, Kurt E.
Dinkelacker, and David M. Gadra.**........................
10.26 Form of Change in Control Agreement--William F. Drake,
Jr., James J. Forese, and David M. Gadra.**...............
EXHIBIT NO. TITLE PAGE
----------- ----- ----
10.27 1980 Deferred Compensation Plan, filed as Exhibit 10.7 to
IKON's 1992 Form 10-K, is incorporated herein by
reference.**...............................................
10.28 1985 Deferred Compensation Plan, filed as Exhibit 10.8 to
IKON's 1992 Form 10-K, is incorporated herein by
reference.**...............................................
10.29 1991 Deferred Compensation Plan, filed as Exhibit 10.9 to
IKON's 1992 Form 10-K, is incorporated herein by
reference.**...............................................
10.30 1994 Deferred Compensation Plan.**.........................
10.31 Executive Deferred Compensation Plan.**....................
11 Statement re: Computation of Earnings per Share. ..........
12.1 Ratio of Earnings to Fixed Charges.........................
12.2 Ratio of Earnings to Fixed Charges Excluding Captive
Finance Subsidiaries. .....................................
12.3 Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends. ................................................
12.4 Ratio of Earnings to Fixed Charges and Preferred Stock
Dividends Excluding Captive Finance Subsidiaries...........
13 Financial Section of IKON's Annual Report to Shareholders
for the fiscal year ended September 30, 1997 (which, except
for those portions thereof expressly incorporated herein by
reference, is furnished for the information of the
Commission and is not "filed" as part of this report). ....
21 Subsidiaries of IKON. .....................................
23 Auditors' Consent. ........................................
24 Powers of Attorney; certified resolution re: Powers of
Attorney. .................................................
27 Financial Data Schedule. ..................................