UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)*
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended December 31, 1999 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 333-71073
IKON Receivables, LLC
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2990188
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1738 Bass Road, P.O. Box 9115, Macon, GA 31208
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(Address of principal executive offices)
(Zip Code)
(912) 471-2300
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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
* Applicable only to corporate issuers:
Indicate the number of shares outstanding of each issuer's classes of common
stock, as of the latest practicable date. (Not applicable)
Registered Debt Outstanding as of February 11, 2000 $1,139,668,865.64
The registrant, an indirect wholly owned subsidiary of IKON Office Solutions,
Inc. ("IKON"), meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is, therefore, filing with the reduced disclosure format
contemplated thereby.
<PAGE>
INDEX
IKON RECEIVABLES, LLC
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets - December 31, 1999 (unaudited) and September 30,
1999
Statement of Income - Three months ending December 31, 1999
(unaudited)
Statement of Cash Flow -- Three months ending December 31, 1999
(unaudited)
Notes to Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II - OTHER INFORMATION
.
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
PART I . FINANCIAL INFORMATION
Item 1: Financial Statements
IKON Receivables, LLC
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
December 31, September 30,
1999 1999
(unaudited)
----------------------- ---------------------
Assets
Investment in leases:
Direct financing leases $1,602,553 $827,842
Less: Unearned income (240,331) (120,076)
----------------------- ---------------------
1,362,222 707,766
Cash and cash equivalents 78,426 26,694
Restricted cash 69,028 29,625
Accounts receivable 43,001 24,057
Prepaid expenses and other assets 4,864 3,045
----------------------- ---------------------
Total assets $1,557,541 $791,187
======================= =====================
Liabilities and Member's equity
Liabilities:
Accounts payable and accrued expenses $0 $1
Accrued interest 3,191 1,540
Lease-backed notes 1,183,902 622,948
----------------------- ---------------------
Total liabilities 1,187,093 624,489
----------------------- ---------------------
Member's equity:
Contributed capital 335,187 149,124
Retained earnings 35,261 17,574
----------------------- ---------------------
Total member's equity 370,448 166,698
----------------------- ---------------------
Total liabilities and member's equity $1,557,541 $791,187
======================= =====================
</TABLE>
See notes to financial statements.
<PAGE>
IKON RECEIVABLES, LLC
STATEMENT OF INCOME
(in thousands)
(unaudited)
Three Months Ended
December 31, 1999
Revenues:
Finance income $38,740
Other income 901
---------
39,641
---------
Expenses:
Interest expense 19,871
Servicing fee expense 2,083
---------
21,954
---------
Net income $17,687
=========
See notes to financial statements.
<PAGE>
IKON RECEIVABLES, LLC
STATEMENT OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
December 31, 1999
-----------------
Operating activities:
Net income $ 17,687
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in operating assets and liabilities:
Accounts receivable (18,944)
Prepaid expenses and other assets 310
Accounts payable and accrued expenses (1)
Accrued interest 1,651
---------
Net cash provided by operating activities 703
---------
Cash flows from investing activities:
Collections on lease receivables 179,033
---------
Net cash provided by investing activities 179,033
---------
Cash flows from financing activities:
Proceeds from issuance of lease-backed notes 697,466
Payments on lease-backed notes (138,641)
Deposit to restricted cash (39,403)
Capital Distribution to Sole Member (647,426)
---------
Net cash used in financing activities (128,004)
---------
Net increase in cash 51,732
Cash at beginning of year 26,694
---------
Cash at end of period $ 78,426
=========
Supplemental noncash financing activities:
Noncash capital contributions $ 23,933
=========
See notes to financial statements
<PAGE>
IKON RECEIVABLES, LLC
NOTES TO FINANCIAL STATEMENTS
(in thousands)
(unaudited)
1. Basis of Presentation
The accompanying unaudited condensed financial statements of IKON
Receivables, LLC (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of
management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included. For further
information, refer to the financial statements and footnotes thereto included in
the Company's annual report on Form 10-K for the year ended September 30, 1999.
2. Capital Contributions
IKON Receivables-1, LLC (the "Sole Member") made an initial cash capital
contribution of $1 to the Company on April 6, 1999. Subsequently, the Sole
Member contributed a segregated pool of $819,572 of office equipment leases or
contracts and related assets (the "1999-1 Asset Pool") to the Company as an
initial transfer of leases to the Company. After the initial transfer, an
additional $45,941 of leases were added to the 1999-1 Asset Pool as substitution
for $41,922 that were cancelled or defaulted subsequent to April 1, 1999,
resulting in a net noncash capital contribution of $4,019. On September 30,
1999, the Company distributed $674,468 to its Sole Member.
During the first quarter of fiscal 2000, the Sole Member contributed a
second segregated pool of $809,556 of office equipment leases or contracts and
related assets (the "1999-2 Asset Pool") to the Company. An additional $73,591
of leases were added to the combined 1999-1 Asset Pool and 1999-2 Asset Pool as
substitution for $49,658 that were cancelled or defaulted subsequent to October
1, 1999, resulting in a net noncash capital contribution of $23,933. On December
31, 1999, the Company distributed $647,426 to its Sole Member.
3. Servicing Agreement
The Company has a servicing agreement with IOS Capital Inc. ("IOS Capital")
for which IOS Capital services the 1999-1 and 1999-2 Asset Pools 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 performing
leases or the outstanding amount of the lease-backed notes (see Note 4). The
servicing fee expense was $2,083 for the period from October 1, 1999 through
December 31, 1999.
4. Lease-Backed Notes
In addition to the $622,948 of Lease-Backed Notes outstanding at September
30, 1999, on October 7, 1999, the Company issued $235,326 in aggregate principal
amount of 6.14125% Lease-Backed Notes, Class A-1 (the "Class A-1 Notes"),
$51,100 in aggregate principal amount of 6.31% Lease-Backed Notes, Class A-2
(the "Class A-2 Notes"), $100,000 in aggregate principal amount of 6.59%
Lease-Backed Notes, Class A-3a (the "Class A-3a Notes"), $240,891 in aggregate
principal amount of variable rate Lease-Backed Notes, Class A-3b (the "Class
A-3b Notes"), and $72,278 in aggregate principal amount of 6.88% Lease-Backed
Notes, Class A-4 (the "Class A-4 Notes" and, together with the Class A-1 Notes,
the Class A-2 Notes, the Class A-3a Notes, the Class A-3b Notes, and
collectively the "1999-2 Notes"). The Class A-3b Notes are variable rate notes
paying interest at a rate of libor plus 0.36% (which we have fixed at 6.63%
through an interest rate swap). The 1999-2 Notes were issued pursuant to an
Indenture dated as of October 1, 1999 between the Company, IOS Capital, and
Harris Trust and Savings Bank, as Indenture Trustee. The Sole Member contributed
a segregated pool of $809,556 of office equipment leases or contracts and
related assets (the "1999-2 Asset Pool") to the Company. The 1999-2 Notes are
collateralized solely by the 1999-2 Asset Pool, which includes a portfolio of
chattel paper composed of leases, leases intended as security agreements and
installment sales contracts acquired or originated by IOS Capital (the "1999-2
Leases") together with the equipment financing portion of each periodic lease or
rental payment due under the 1999-2 Leases on or after the opening of business
on September 1, 1999, and all
<PAGE>
related casualty payments, retainable deposits, and termination payments. The
1999-2 Notes have certain credit enhancement features available to noteholders
including a reserve account, an overcollateralization account and a
noncancellable insurance policy from Ambac Assurance Corporation with respect to
the 1999-2 Notes.
Payments on the 1999-2 Notes are due on the fifteenth day of each month (or
if that is not a Business Day, the next succeeding Business Day), commencing on
November 15, 1999. The 1999-2 Notes bear interest from October 7, 1999 at the
respective interest rates specified above. The interest rate is calculated on
the basis of a year of 360 days comprised of twelve 30-day months (except in the
case of the Class A-1 Notes and the Class A-3b Notes, for which interest will be
calculated on the basis of a year of 360 days and the actual number of days in
the interest period) payable on the payment date. On each payment date, to the
extent funds are available therefore from the collection of the lease
receivables, principal payment will be made to noteholders in the following
priority: (i) to the Class A-1 noteholders only, until the outstanding principal
amount on the Class A-1 Notes has been reduced to zero, then (ii) to the Class
A-2 noteholders only, until the outstanding principal amount on the Class A-2
Notes has been reduced to zero, then (iii) to the Class A-3 noteholders only,
until the outstanding principal amount on the Class A-3 Notes has been reduced
to zero, and then (iv) to the Class A-4 noteholders, until the outstanding
principal amount on the Class A-4 Notes has been reduced to zero. Each class of
1999-2 Notes will be payable in full on the applicable stated maturity date,
which is as follows: Class A-1 Notes - October 2000, Class A-2 Notes - May 2001,
Class A-3a Notes - August 2003, Class A-3b Notes - August 2003, and Class A-4
Notes - November 2005. However, if all payments are made on the 1999-2 Leases as
scheduled, final payment on the 1999-2 Notes will be earlier than the stated
maturity dates. The Company may, on any payment date, redeem the 1999-2 Notes
when the total discounted lease balance is less than or equal to 10% of the
total discounted lease balance as of September 1, 1999.
IOS Capital services the 1999-2 Leases pursuant to an Assignment and
Servicing Agreement by and among IOS Capital, as Originator and Servicer, the
Sole Member, as Seller, and the Company, as Issuer. IOS Capital may delegate its
servicing responsibilities to one or more sub-servicers, but such delegation
does not relieve IOS Capital of its liabilities with respect thereto. IOS
Capital retains possession of the 1999-2 Leases and related files, and receives
a monthly service fee from the Company for servicing the 1999-2 Leases.
The average interest rate on all the lease-backed notes outstanding at
December 31, 1999 was 6.2%. Interest paid amounted to $18,220 for the period
October 1, 1999 through December 31, 1999.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Pursuant to General Instruction H(2)(a) of Form 10-Q, 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.
IKON Receivables, LLC (the "Company") is a special purpose Delaware limited
liability company, all of the membership interests in which are held by IKON
Receivables-1, 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, Inc. ("IOS Capital"), a wholly owned finance subsidiary of IKON
Office Solutions, Inc. ("IKON"), a publicly traded office technology company
with fiscal 1999 revenues of $5.5 billion. The Company was organized in the
State of Delaware on January 20, 1999 and is managed by IKON Receivables
Funding, Inc. (the "Manager").
On May 19, 1999, the Company issued $304,474,000 aggregate principal amount
of 5.11% Lease-Backed Notes, Class A-1 (the "Class A-1 Notes"), $61,579,000
aggregate principal amount of 5.60% Lease-Backed Notes, Class A-2 (the "Class
A-2 Notes"), $304,127,000 aggregate principal amount of 5.99% Lease-Backed
Notes, Class A-3 (the "Class A-3 Notes"), and $81,462,000 aggregate principal
amount of 6.23% Lease-Backed Notes, Class A-4 (the "Class A-4 Notes" and,
together with the Class A-1 Notes, the Class A-2 Notes, the Class A-3 Notes, the
"1999-1 Notes"). The 1999-1 Notes were issued pursuant to an Indenture dated as
of April 1, 1999 between the Company, IOS Capital, and Harris Trust and Savings
Bank, as Indenture Trustee. The 1999-1 Notes are collateralized solely by the
1999-1 Asset Pool, which includes a portfolio of chattel paper composed of
leases, leases intended as security agreements and installment sales contracts
acquired or originated by IOS Capital (the "1999-1 Leases") (together with the
equipment financing portion of each periodic lease or rental payment due under
the 1999-1 Leases on or after the opening of business on April 1, 1999), and all
related casualty payments, retainable deposits, and termination payments. The
1999-1 Notes have certain credit enhancement features available to noteholders
including a reserve account, an overcollateralization account and a
noncancellable insurance policy from Ambac Assurance Corporation with respect to
the 1999-1 Notes.
Payments on the 1999-1 Notes are due on the fifteenth day of each month (or
if that is not a Business Day, the next succeeding Business Day), commencing on
June 15, 1999. The 1999-1 Notes bear interest from May 25, 1999 at the
respective fixed per annum interest rates specified above. The interest rate is
calculated on the basis of a year of 360 days comprised of twelve 30-day months
(except in the case of the Class A-1 Notes, for which interest will be
calculated on the basis of a year of 360 days and the actual number of days in
the interest period) payable on the payment date. On each payment date, to the
extent funds are available therefore from the collection of the lease
receivables, principal payments will be made to noteholders in the following
priority: (i) to the Class A-1 noteholders only, until the outstanding principal
amount on the Class A-1 Notes has been reduced to zero, then (ii) to the Class
A-2 noteholders only, until the outstanding principal amount on the Class A-2
Notes has been reduced to zero, then (iii) to the Class A-3 noteholders only,
until the outstanding principal amount on the Class A-3 Notes has been reduced
to zero, and then (iv) to the Class A-4 noteholders, until the outstanding
principal amount on the Class A-4 Notes has been reduced to zero. Each class of
1999-1 Notes will be payable in full on the applicable stated maturity date,
which is as follows: Class A-1 Notes - June 2000, Class A-2 Notes, Class A-3
Notes and Class A-4 Notes - May 2005. However, if all payments are made on the
1999-1 Leases as scheduled, final payment on the 1999-1 Notes will be earlier
than the stated maturity dates. The Company may, on any payment date, redeem the
1999-1 Notes when the total discounted lease balance is less than or equal to
10% of the total discounted lease balance as of April 1, 1999.
IOS Capital services the 1999-1 Leases pursuant to an Assignment and
Servicing Agreement by and among IOS Capital, as Originator and Servicer, the
Sole Member, as Seller, and the Company, as Issuer. IOS Capital may delegate its
servicing responsibilities to one or more sub-servicers, but such delegation
does not relieve IOS Capital of its liabilities with respect thereto. IOS
Capital retains possession of the 1999-1 Leases and related files, and receives
a monthly service fee from the Company for servicing the 1999-1 Leases.
<PAGE>
On October 7, 1999, the Company issued $235,326,000 in aggregate principal
amount of 6.14125% Lease-Backed Notes, Class A-1 (the "Class A-1 Notes"),
$51,100,000 in aggregate principal amount of 6.31% Lease-Backed Notes, Class A-2
(the "Class A-2 Notes"), $100,000,000 in aggregate principal amount of 6.59%
Lease-Backed Notes, Class A-3a (the "Class A-3a Notes"), $240,891,000 in
aggregate principal amount of variable rate Lease-Backed Notes, Class A-3b (the
"Class A-3b Notes"), and $72,278,000 in aggregate principal amount of 6.88%
Lease-Backed Notes, Class A-4 (the "Class A-4 Notes" and, together with the
Class A-1 Notes, the Class A-2 Notes, the Class A-3a Notes, Class A-3b Notes,
and collectively the "1999-2 Notes"). The Class A-3b Notes are variable rate
notes paying interest at a rate of libor plus 0.36% (which we have fixed at
6.63% through an interest rate swap). The 1999-2 Notes were issued pursuant to
an Indenture dated as of October 1, 1999 between the Company, IOS Capital and
Harris Trust and Savings Bank, as Indenture Trustee. The Sole Member contributed
a segregated pool of $809,556,000 of office equipment leases or contracts and
related assets (the "1999-2 Asset Pool") to the Company. The 1999-2 Notes are
collateralized solely by the 1999-2 Asset Pool, which includes a portfolio of
chattel paper composed of leases, leases intended as security agreements and
installment sales contracts acquired or originated by IOS Capital (the "1999-2
Leases") together with the equipment financing portion of each periodic lease or
rental payment due under the 1999-2 Leases on or after the opening of business
on September 1, 1999, and all related casualty payments, retainable deposits,
and termination payments. The 1999-2 Notes have certain credit enhancement
features available to noteholders including a reserve account, an
overcollateralization account and a noncancellable insurance policy from Ambac
Assurance Corporation with respect to the 1999-2 Notes.
Payments on the 1999-2 Notes are due on the fifteenth day of each month (or
if that is not a Business Day, the next succeeding Business Day), commencing on
November 15, 1999. The 1999-2 Notes bear interest from October 7, 1999 at the
respective interest rates specified above. The interest rate is calculated on
the basis of a year of 360 days comprised of twelve 30-day months (except in the
case of the Class A-1 Notes and the Class A-3b Notes, for which interest will be
calculated on the basis of a year of 360 days and the actual number of days in
the interest period) payable on the payment date. On each payment date, to the
extent funds are available therefore from the collection of the lease
receivables, principal payments will be made to noteholders in the following
priority: (i) to the Class A-1 Noteholders only, until the outstanding principal
amount on the Class A-1 Notes has been reduced to zero, then (ii) to the Class
A-2 noteholders only, until the outstanding principal amount on the Class A-2
Notes has been reduced to zero, then (iii) to the Class A-3 noteholders only,
until the outstanding principal amount on the Class A-3 Notes has been reduced
to zero, and then (iv) to the Class A-4 noteholders, until the outstanding
principal amount on the Class A-4 Notes has been reduced to zero. Each class of
1999-2 Notes will be payable in full on the applicable stated maturity date,
which is as follows: Class A-1 Notes - October 2000, Class A-2 Notes - May 2001,
Class A-3a Notes - August 2003, Class A-3b Notes - August 2003, and Class A-4
Notes - November 2005. However, if all payments are made on the 1999-2 Leases as
scheduled, final payment on the 1999-2 Notes will be earlier than the stated
maturity dates. The Company may, on any payment date, redeem the 1999-2 Notes
when the total discounted lease balance is less than or equal to 10% of the
total discounted lease balance as of September 1, 1999.
IOS Capital services the 1999-2 Leases pursuant to an Assignment and
Servicing Agreement by and among IOS Capital, as Originator and Servicer, the
Sole Member, as Seller, and the Company, as Issuer. IOS Capital may delegate its
servicing responsibilities to one or more sub-servicers, but such delegation
does not relieve IOS Capital of its liabilities with respect thereto. IOS
Capital retains possession of the 1999-2 Leases and related files, and receives
a monthly service fee from the Company for servicing the 1999-2 Leases.
Interest income earned on the Asset Pool is expected to offset interest
expense on the Notes, amortization of debt issuance costs and discount on the
notes and the fees charged by IOS Capital for servicing the Asset Pool and
providing administrative services to the Company. For the quarter ending
December 31, 1999, income generated from the Asset Pool was approximately $38.7
million, other income earned was $.9 million, while interest expense during the
quarter was $19.9 million and administrative expenses were $2.1 million.
Collections on the lease receivables during the period have been approximately
$179.0 million. The Company repaid $138.6 million of principal on the Notes. The
Company portfolio of leases has an average yield of 10.7% at December 31, 1999,
while the Company's weighted
<PAGE>
average interest rate on its debt outstanding as of December 31, 1999 is 6.2%.
This rate differential, in addition to the overcollateralization of the lease
portfolio, gives rise to the 45% net income to revenue relationship for the
quarter.
Impact of Year 2000
January 2000 Update. Through January 31, 2000, the Company's and IOS Capital's
operations are fully functioning and have not experienced any significant issues
associated with the Year 2000 problem (as described below).
IOS Capital is responsible for servicing the 1999-1 and 1999-2 Leases and,
therefore, any Year 2000 issues adversely affecting IOS Capital could adversely
affect the Company.
State of Readiness. The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any of
IOS Capital's computer programs or hardware that have date-sensitive software or
embedded technology (non-IT systems) may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar normal business activities. The potential for a problem exists with
all computer hardware and software, as well as in products with embedded
technology; copiers and fax machines; security and HVAC systems; voice/telephony
systems; elevators, etc.
IKON has appointed a Year 2000 Corporate Compliance Team, which has
prepared a compliance program for all business units, including IOS Capital, and
is responsible for coordination and inspecting compliance activities in all
business units. The compliance program requires all business units and locations
in every country to inventory potentially affected systems and products, assess
risk, take any required corrective actions, test and certify compliance. IKON's
Year 2000 Testing and Certification Guidelines delineate the Year 2000
compliance process, testing and quality assurance guidelines, certification and
reporting processes and contingency planning. An independent consulting company
has reviewed the compliance program.
Costs. The Company has no internal or external costs relating to the Year
2000 issue. IOS Capital has used both internal and external resources to
reprogram or replace, test and implement its IT and non-IT systems for Year 2000
modifications. IOS Capital does not separately track the internal costs incurred
on the Year 2000 project. Such costs are principally payroll and related costs
for internal IT personnel. IOS Capital's total cost of the Year 2000 project,
excluding these internal costs, is approximately $1.2 million and is being
funded through operating cash flows. Of the total estimated project cost,
approximately $0.2 million is attributable to the purchase of new software and
hardware and has been capitalized. Through January 31, 2000, IOS Capital has
incurred approximately $1.2 million ($1.0 million expensed and $0.2 million
capitalized), related to its Year 2000 project.
Risks. Management believes, based on the information currently available to
it, that the most reasonably likely worst case scenario that could be caused by
technology failures relating to Year 2000 could pose a significant threat not
only to the Company, IOS Capital, IKON, its customers and suppliers, but to all
businesses. Risks include:
o Legal risks, including customer, supplier, employee or shareholder
lawsuits over failure to deliver contracted services, product failure,
or health and safety issues.
o Loss of revenues due to failure to meet customer quality expectations.
o Increased operational costs due to manual processing, data corruption
or disaster recovery.
o Inability to bill or invoice.
The cost of the project and the date on which IKON and IOS Capital believe
it will complete the Year 2000 modifications are based on management's best
estimates, which were derived using numerous assumptions of future events,
including the continued availability of certain resources and other factors.
However, there can be no
<PAGE>
guarantee that these estimates will be achieved and actual results could differ
materially from those anticipated. Specific factors that might cause such
material differences include, but are not limited to, the availability and costs
of personnel trained in this area, the ability to locate and correct all
relevant computer codes, and similar uncertainties.
Contingency Plans. IKON's Guidelines require that contingency plans be
developed and validated in the event that any critical system cannot be
corrected and certified before the system's failure date. Contingency plans were
developed and completed.
Pending Accounting Changes
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133), which establishes accounting and
reporting standards for derivative instruments and hedging activities. It will
require us to recognize all derivatives as either assets or liabilities and
measure the instruments at fair value. The statement is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000. The Company intends to
adopt the standard on October 1, 2000. The Company does not believe the effect
of adoption will be material.
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Pursuant to General Instruction H(2)(c) of Form 10-Q the information required by
this item has been omitted.
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, 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 Company's and/or IKON's future financial condition
and results. These risks and uncertainties, include, but are not limited to,
factors which may affect the Company's ability to recoup the full amount due on
the 1999-1 and 1999-2 Leases (such as lessee defaults or factoring impeding
recovery efforts), and risks and uncertainties affecting the business of IOS
Capital and/or IKON as set forth in IOS Capital's and IKON's periodic reports
filed with the Securities & Exchange Commission, including, but not limited to,
risks and uncertainties relating to conducting operations in a competitive
environment; delays, difficulties, management transitions and employment issues
associated with consolidation of, and/or changes in business operations;
managing the integration of existing and acquired companies; risks and
uncertainties associated with existing or future vendor relationships; and
general economic conditions. Certain additional risks and uncertainties are set
forth in the Company's fiscal 1999 Annual Report on Form 10-K filed with the
Securities and Exchange Commission. 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.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
27 Financial Data Schedule
(b) Reports on Form 8-K
On October 1, 1999, the Company filed a Current Report on Form 8-K
to file, under Item 5 of the form, certain information regarding
the offering of the Company's 1999-2 Notes.
On October 1, 1999, the Company filed a Current Report on Form 8-K
to file, under Item 5 of the form, certain information regarding
the consolidated financial statements of Ambac Assurance
Corporation and subsidiaries.
On October 21, 1999, the Company filed a Current Report on Form 8-K
to file, under Items 2 and 7 of the form, certain information
regarding the Registration of the 1999-2 Notes.
On December 21, 1999, the registrant filed a Current Report on Form
8-K to file, under Item 4 of the form, information regarding the
appointment of PricewaterhouseCoopers LLP as its independent
auditors for the fiscal year ending September 30, 2000 to replace
the firm of Ernst & Young LLP who were dismissed as auditors of the
registrant effective with their completion of their audit of the
registrant's financial statements for the fiscal year ended
September 30, 1999
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized. This report has also been signed by the
undersigned in his capacity as the chief accounting officer of the Registrant.
IKON RECEIVABLES, LLC
By: IKON RECEIVABLES FUNDING, INC.
As Manager
Date February 14, 2000 /s/ Jack F. Quinn
------------------- ----------------------
Jack F. Quinn
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of IKON Receivables, LLC and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0001077175
<NAME> IKON RECEIVABLES, LLC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> Sep-30-2000
<PERIOD-END> Dec-31-1999
<CASH> 78,426
<SECURITIES> 0
<RECEIVABLES> 1,405,223 <F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,557,541
<CURRENT-LIABILITIES> 0
<BONDS> 1,183,902
0
0
<COMMON> 0
<OTHER-SE> 370,448
<TOTAL-LIABILITY-AND-EQUITY> 1,557,541
<SALES> 0
<TOTAL-REVENUES> 39,641
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,083
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,871
<INCOME-PRETAX> 17,687
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,687
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,687
<EPS-BASIC> 0 <F2>
<EPS-DILUTED> 0 <F2>
<FN>
<F1>
Includes net investments in leases of $1,362,222 and other accounts
receivable.
<F2>
Not required as the registrant is a wholly-owned subsidiary.
</FN>
</TABLE>
