<PAGE>
PROSPECTUS MAY 1, 1997
IKON OFFICE SOLUTIONS, INC.
13,534,304 SHARES COMMON STOCK
(NO PAR VALUE)
This Prospectus relates to the offer and sale from time to time by IKON
Office Solutions, Inc., an Ohio corporation ("IKON" or the "Company"), or its
subsidiaries of 13,534,304 shares of IKON's common stock, no par value (the
"Common Stock"), in exchange for shares of capital stock of other companies,
or in exchange for assets used in or related to the business of such
companies. See "SECURITIES COVERED BY THIS PROSPECTUS." Common Stock offered
hereby may generally be resold by the person acquiring them without further
registration under the Securities Act of 1933. For further information on
resales, see "RESALES."
The Common Stock is listed and traded on the New York, Philadelphia and
Chicago Stock Exchanges under the symbol "IKN".
----------------
THE COMMON STOCK OFFERED HEREBY INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
COMMENCING ON PAGE 6.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY IKON. NEITHER THIS PROSPECTUS NOR ANY
PROSPECTUS SUPPLEMENT CONSTITUTES AN OFFER TO SELL OR THE SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT OR IN THE AFFAIRS OF
IKON SINCE SUCH DATE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION....................................................... 3
DOCUMENTS INCORPORATED BY REFERENCE......................................... 3
THE COMPANY................................................................. 4
RECENT DEVELOPMENTS......................................................... 4
SECURITIES COVERED BY THIS PROSPECTUS....................................... 5
RISK FACTORS................................................................ 5
FORWARD-LOOKING INFORMATION................................................. 6
PLAN OF DISTRIBUTION........................................................ 6
RESALES..................................................................... 6
USE OF PROCEEDS............................................................. 7
SELECTED FINANCIAL DATA..................................................... 7
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK............................. 9
Dividend Rights........................................................... 9
Preemptive Rights......................................................... 9
Preferred Share Purchase Rights........................................... 9
Voting Rights............................................................. 10
Redemption Provisions and Sinking Fund.................................... 11
Conversion Rights......................................................... 11
Liquidation Rights........................................................ 11
Liability for Assessment.................................................. 12
IKON COMMON STOCK: OHIO ANTITAKEOVER PROVISIONS............................. 12
LEGAL OPINIONS.............................................................. 12
EXPERTS..................................................................... 12
</TABLE>
2
<PAGE>
AVAILABLE INFORMATION
IKON is subject to the informational requirements of the Securities Exchange
Act of 1934 (the "1934 Act") and in accordance therewith files reports, proxy
statements and other information with the Securities and Exchange Commission
(the "Commission"). Such reports, proxy statements and other information filed
by IKON with the Commission can be inspected and copied at the offices of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20547 and at the following Regional Offices of the Commission: Northeast
Regional Office, 7 World Trade Center, New York, New York 10048; and Midwest
Regional Office, Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material can also be obtained from the
Public Reference Section of the Commission at Room 1024, Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. This
Commission also maintains a Web Site (httpnnwww.sec.gov) containing reports,
proxy statements and other information about registrants, including IKON. Such
material can also be inspected at the New York, Philadelphia, and Chicago
Stock Exchanges on which IKON's common stock is listed. This Prospectus
incorporates documents by reference which are not presented herein or
delivered herewith. These documents are available upon request from Michael N.
Kilpatric, Vice President Communications, Communications Department, IKON
Office Solutions, Inc., P.O. Box, 834, Valley Forge, PA 19087, telephone (610)
296-8000.
IKON has filed with the Commission a Registration Statement on Form S-4
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933 with respect to the securities to
which this Prospectus relates. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to IKON and such securities, reference is
made to the Registration Statement, which may be examined or copied at the
offices of the Commission. Statements contained in this Prospectus as to the
contents of any contract or any other document filed, or incorporated by
reference, as an exhibit to the Registration Statement, are qualified in all
respects by such reference.
DOCUMENTS INCORPORATED BY REFERENCE
IKON's annual report on Form 10-K for the fiscal year ended September 30,
1996, its Quarterly Report on Form 10-Q for the quarter ended December 31,
1996, and its Current Reports on Form 8-K dated January 16, 1997, April 14,
1997 and April 23, 1997 are incorporated herein by reference.
The description of IKON's common stock contained in a registration statement
filed under the Securities Exchange Act of 1934, including any amendment or
report filed for the purpose of updating such description, is incorporated
herein by reference. IKON's registration statement on Form 8-A, relating to
IKON's preferred share purchase rights, is also incorporated herein by
reference.
All documents filed by IKON pursuant to Section 13(a), 13(c), 14, or 15(d)
of the 1934 Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Common Stock shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing such documents. This Prospectus does not contain all
information set forth in the Registration Statement to which reference is made
hereby.
IKON will provide without charge to each person, including any beneficial
owner to whom a copy of this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents referred to
above which have been incorporated in this Prospectus by reference, other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference in such documents). Requests for such copies should be directed
to Michael N. Kilpatric, Vice President Communications, Communications
Department, IKON Office Solutions, Inc., P.O. Box 834 Valley Forge, PA 19087,
telephone number (610) 296-8000.
3
<PAGE>
THE COMPANY
IKON Office Solutions, Inc. ("IKON" or the "Company") was incorporated in
Ohio in 1952 and is the successor to a business incorporated in 1928.
Effective June 1, 1997, the address of the Company's principal executive
offices will be 70 Valley Stream Parkway, Malvern, PA 19355 (telephone number
(610) 296-8000). Prior to June 1, 1997, the address of the Company's principal
executive offices is P.O. Box 834, Valley Forge, PA 19087 (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 has the largest network of independent copier
and office equipment dealers in North America and the United Kingdom. IKON
distributes the products of numerous manufacturers, including Canon, Oce,
Ricoh and Sharp.
Beginning in 1992, IKON extended its business to provide outsourcing and
imaging services, such as reprographic off-site facilities management and
specialized document copying services, turnkey mailroom/copy center on-site
services, legal industry document services, business document services and
file conversion/imaging services. IKON also offers network consulting and
design, computer networking, technology training and software solutions for
the networked office environment, in order to provide one-stop shopping to
customers who seek quality, accessible office productivity solutions.
IKON has locations throughout the United States and Canada, and in Europe
(primarily 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. (See Risk Factors--Competition).
IKON's customers include large and small businesses, professional firms and
government agencies. IKON distributes products and provides services
throughout 49 states, seven Canadian provinces, in Europe (primarily in the
United Kingdom) and in Mexico.
In fiscal 1996, IKON generated approximately $4.1 billion in revenues and
$310 million in operating income. Finance subsidiaries contributed 15.1% of
the Company's operating income in fiscal 1996.
During fiscal 1996, IKON acquired 100 companies in the United States,
Canada, and Europe, with an aggregate of approximately $878 million in
annualized revenues. Of the 100 companies acquired in fiscal 1996, 82 were
traditional copier companies, 13 were outsourcing and imaging companies and
five were systems integrators. IKON's international expansion during fiscal
1996 included the acquisition of companies in France and Mexico.
RECENT DEVELOPMENTS
In March 1997, IKON announced the acceleration of its program to transform
the Company into a streamlined and integrated provider of total office
solutions. Beginning with the quarter ended March 31, 1997, the Company plans
to separately disclose transformation expenses over seven quarters. IKON
expects to complete the transformation program in October 1998. The most
significant component of the transformation expenses in the second quarter
ended March 31, 1997 was the write off of the capital costs and other expenses
relating to the SAP computer platform, which were $25 million, or 41% of $61
million in total transformation costs for the quarter. This reflects IKON's
decision to base its information technology platform on the common platform
that 75% of its operations are currently using.
IKON's growth strategy is to transform more than 80 individually operating
copier dealers into an integrated company which provides total office
technology solutions ranging from copiers, digital printers, and document
management services to systems integration, training and other networking
technology services. The transformation involves a variety of activities,
including the consolidation of purchasing, inventory control,
logistics, and other activities into 13 customer service centers in the United
States, and the establishment of a single financial processing center. In
connection with the transformation, the Company will also build a common
information technology system, adopt a common name, and create marketplace-
focused field operations with greater attention to customer sales and service.
4
<PAGE>
SECURITIES COVERED BY THIS PROSPECTUS
The shares of Common Stock covered by this Prospectus are available for use
in future acquisitions of other businesses or properties, which may be similar
or dissimilar to IKON's present activities. The consideration offered by IKON
in such acquisitions, in addition to the shares of Common Stock offered
hereby, may include cash, debt or other securities (which may be convertible
into shares of Common Stock covered by this Prospectus), or assumption by IKON
of liabilities of the business being acquired, or a combination thereof. It is
contemplated that the terms of acquisitions will be determined by negotiations
between IKON and the owners of the business or properties to be acquired, with
IKON taking into account the quality of management, the past and potential
earnings power and growth of the business or properties to be acquired, and
other relevant facts, and it is anticipated that shares of Common Stock issued
in acquisitions will be valued at a price reasonably related to the market
value of the Common Stock either at the time the terms of the acquisition are
tentatively agreed upon or at or about the time or times of delivery of the
shares.
RISK FACTORS
Prospective purchasers of the Common Stock offered hereby should consider
carefully the following risk factors.
ACQUISITIONS
The Company has increased revenues through significant acquisition activity.
During fiscal 1995, the Company acquired assets or businesses through 102
transactions which added approximately $578 million in annualized revenues.
These acquisitions focused on analog copier and fax distribution and servicing
companies and complementary copying and document management/outsourcing
providers. During fiscal 1996, the Company completed 100 acquisitions, which
added approximately $878 million in annualized revenues. Fiscal 1995 and 1996
acquisitions were focused primarily on companies engaged in analog copier and
fax sales and service, and outsourcing services; however, during the third
quarter of fiscal 1996, the Company shifted its acquisition focus to technical
service companies, such as systems integrators, systems consulting companies
and technical training firms, in order to provide an enhanced array of total
office solutions to customers. The Company's recent shift in acquisition
emphasis involves certain risks, including risks of successfully managing an
aggressive program to acquire companies with technical services and products
that are relatively new to the Company, and effectively integrating such new
services and products with the analog copier and fax and outsourcing services
and products. There can be no assurance that future acquisitions will continue
at a pace comparable to that which was achieved in fiscal 1996 or fiscal 1995
or that a comparable level of acquisition candidates will continue to be
available to the Company on favorable terms. Finally, there can be no
assurance that companies or businesses that have been acquired or that may be
acquired in the future will achieve sales and profitability levels that
justify historical investment costs.
BUSINESS TRANSFORMATION
The Company is currently engaged in program to transform more than 80
individually operating copier dealers into an integrated company which
provides total office technology solutions, including copiers, digital
printers, document management services, systems integration, training and
other networking technology services. The transformation includes
consolidation of purchasing, inventory control, logistics and other activities
into 13 customer service centers in the United States, establishing a single
financial processing center, building a common information technology system,
adopting a common name and creating marketplace-focused field operations with
greater attention to customer sales and services. The Company faces certain
risks associated with this large-scale transformation project, including
delays, difficulities, technological changes, management transitions, and
employment issues.
COMPETITION
The Company's businesses operate within highly competitive markets and the
Company faces certain risks associated with such conditions, in general, and
from significant competition from two principal competitors, in particular.
One competitor has advantages which include substantially greater revenues and
financial resources, a significant market share at the high end segment of the
copier and imaging products market, and certain sourcing advantages associated
with internally manufactured office solutions products. While the Company has
a wider
5
<PAGE>
distribution network than its other principal competitor, and access to
comparable products, such competitor has certain sourcing and pricing
advantages related to a strategic alliance with a large office solutions
products manufacturer.
INTERNATIONAL EXPANSION
The Company intends to focus future attention and resources on international
expansion, particularly in Europe. Expansion into international markets
involves additional risks relating to currency exchange rates, new and
different legal, regulatory and competitive environments, differences in
business conditions and customs, and difficulties in staffing and managing
foreign operations and other factors.
ANTITAKEOVER PROVISIONS
The Company's Articles of Incorporation, which empower the Board of
Directors of the Company to issue Preferred Stock with terms established by
the Board and without share action, the Company's Shareholder's Rights Plan
and provisions within the Ohio General Corporation Law ("Ohio Law"), may have
the effect, either alone or in combination with each other, of making more
difficult or discouraging a tender offer, merger, change of control or
takeover attempt that is opposed by the Company's Board of Directors.
FORWARD-LOOKING INFORMATION
This Prospectus contains, and other materials filed or to be filed by the
Company with the Commission which are incorporated by reference herein, as
well as information included in oral statements or other written statements
made or to be made by the Company, contain or will contain or include,
disclosures which are forward-looking statements within the meaning of Section
27A of the Securities Act of 1934, as amended (the "Act"), and Section 21E of
the Exchange Act. Such forward-looking statements address, among other things,
strategic initiatives (including plans for enhancing the Company's business
through new acquisitions, information technology systems, sales strategies,
market growth plans, margin enhancement initiatives, capital expenditures, and
financing sources). 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 from those expressed in any forward-looking statements made by or on
behalf of the Company.
PLAN OF DISTRIBUTION
Shares of Common Stock will be offered in connection with IKON's or a
subsidiary's acquisition of other businesses or properties from time to time
as described above. A maximum of 13,534,304 shares of Common Stock may be sold
pursuant to this Prospectus. These shares will ordinarily represent
consideration paid directly upon the acquisition of businesses or properties.
The shares may also include shares to be delivered upon the exercise or
satisfaction of conversion or purchase rights which are created in connection
with acquisitions or which were previously created or assumed by the companies
whose businesses or properties were acquired.
RESALES
Common Stock offered hereby may generally be resold by the person acquiring
such shares without further registration under the Act, unless such persons
are "affiliates" or "underwriters" within the meaning of the Act.
6
<PAGE>
Any person receiving shares offered hereby who is an "affiliate" of IKON may
be subject to certain limitations on resale. An "affiliate" is a person who
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with the Company. "Control," as used
in the preceding sentence, means the direct or indirect power to direct or
cause the direction of the management and policies of the Company through
ownership of voting securities, contract or otherwise. In the absence of a
special relationship between IKON and a person who receives shares from IKON
in an acquisition transaction (such as election of such person to IKON's Board
of Directors or ownership by such person of a significant percentage of IKON's
outstanding Common Stock), such a person generally would not be considered an
"affiliate" of IKON within the meaning of the Act. Therefore, the limitations
on resale applicable to affiliates would not apply to such person.
Any person receiving shares offered hereby who is an "underwriter" of IKON
may also be subject to certain limitations upon resale. An "underwriter"
includes a person who purchases IKON shares with a view to the distribution of
the shares. Although an "underwriter" may otherwise be subject to certain
resale limitations, if such person complies with the "safe harbor" provisions
of rule 145(d), he or she may freely resell shares so long as certain
conditions are met. For example, a person who receives shares of Common Stock
from IKON in a typical acquisition transaction is deemed to be an
"underwriter" as defined by the Act, but such person is generally free to sell
such shares at any time by complying with rule 145(d), which requires that the
amount of Common Stock which may be sold by such person in any three-month
period may not exceed the greater of (i) 1% of the Common Stock outstanding as
shown by the most recent report or statement published by IKON, or (ii) the
average weekly trading volume in Common Stock reported on the NYSE Composite
tape during the four calendar weeks preceding the order to sell. Such sales
must also be made in "brokers' transactions," which are ordinary sales through
a broker acting as agent without special commission arrangements or selling
efforts.
In order for affiliates or underwriters not protected by Rule 145(d) to
resell shares offered hereby, IKON would have to agree 1) to provide an
opinion to the effect that an exemption applies to such resale, 2) to amend
the Registration Statement of which this Prospectus is a part to permit such
resales, or 3) to file a new registration statement which includes the shares
proposed to be resold. Unless a written agreement obligates IKON to do so,
there is no assurance that IKON will agree to provide such opinion, amendment
or registration.
USE OF PROCEEDS
The proceeds of the sale of Common Stock offered hereby, to the extent such
proceeds consist of the assets of acquired businesses, will be added to the
assets of IKON or a subsidiary. Cash proceeds included in such assets, if any,
will be added to the general funds of IKON or a subsidiary and may be used for
general corporate purposes, including capital expenditures and working capital
requirements.
SELECTED FINANCIAL DATA
The following annual data has been derived from financial statements audited
by Ernst & Young LLP, independent auditors. Consolidated balance sheets at
September 30, 1996 and 1995 and the related consolidated statements of income,
cash flows and changes in shareholders' equity for each of the three fiscal
years in the period ended September 30, 1996, and the related auditor's
report, appear in the Company's 1996 Annual Report to Shareholders, portions
of which are incorporated by reference in the Company's Annual Report on Form
10-K for the year ended September 30, 1996. Interim data presented are
unaudited, but management believes that all adjustments necessary for a fair
presentation have been made. Operating results for the three months ended
December 31, 1996 are not necessarily indicative of the results that may be
expected for subsequent quarters or for the year ending September 30, 1997.
The information set forth below should be read in conjunction with the
financial statements and management's discussion and analysis included in the
Form 10-K and in the Form 10-Q for the quarter ended December 31, 1996
incorporated by reference in this Prospectus.
7
<PAGE>
IKON OFFICE SOLUTIONS
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, FISCAL YEAR ENDED SEPTEMBER 30
---------------------- -----------------------------------------------------------
1996 1995 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ---------- ----------
(UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUES:
Net sales.............. $ 638,828 $ 515,012 $2,381,151 $1,807,408 $1,397,271 $ 986,274 $ 786,146
Service and rentals.... 453,860 353,772 1,560,915 1,191,175 927,065 685,629 529,144
Finance income......... 47,746 31,795 157,707 93,019 66,731 51,149 38,936
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,140,434 900,579 4,099,773 3,091,602 2,391,067 1,723,052 1,354,226
---------- ---------- ---------- ---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of goods sold..... 404,934 333,226 1,552,183 1,189,533 905,933 633,873 487,741
Service and rental
costs................. 216,107 169,335 743,110 565,131 426,936 310,333 233,776
Finance interest ex-
pense................. 20,011 14,809 68,043 40,216 27,978 23,662 19,523
Selling and administra-
tive.................. 417,970 314,534 1,426,381 1,084,538 853,633 635,895 523,369
Loss from unconsoli-
dated affiliate....... 117,158 2,538
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,059,022 831,904 3,789,717 2,879,418 2,331,638 1,606,301 1,264,409
---------- ---------- ---------- ---------- ---------- ---------- ----------
Investment Gain, Net... 6,683
Operating Income....... 81,412 68,675 310,056 212,184 59,429 116,751 96,500
Interest Expense....... 8,201 7,340 37,179 21,672 16,118 15,382 11,400
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from Continuing
Operations Before
Taxes and
Extraordinary Loss.... 73,211 61,335 272,877 190,512 43,311 101,369 85,100
Taxes on Income........ 28,552 24,398 107,984 75,501 41,315 40,093 33,488
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from Continuing
Operations Before
Extraordinary Loss.... 44,659 36,937 164,893 115,011 1,996 61,276 51,612
Discontinued Opera-
tions................. 20,151 26,229 45,848 88,661 74,476 (58,648) 47,533
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before Extraor-
dinary Loss........... 64,810 63,166 210,741 203,672 76,472 (2) 2,628 99,145
Extraordinary Loss from
extinguishment of
debt, net of tax
benefit............... (12,156)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income............. 52,654 63,166 210,741 203,672 76,472 2,628 99,145
Preferred Dividends.... 4,885 7,664 22,319 15,209 11,572 9,571
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net Income (Loss)
Available to Common
Shareholders.......... $ 47,769 $ 55,502 $ 188,422 $ 188,463 $ 64,900 $ (6,943) $ 99,145
========== ========== ========== ========== ========== ========== ==========
EARNINGS (LOSS) PER
SHARE:(3)
Continuing Operations.. $ 0.30 $ 0.25 $ 1.12 $ 0.86 $ (0.09)(2) $ 0.52 $ 0.52
Discontinued Opera-
tions................. 0.15 0.22 0.36 0.76 0.67 (0.59) 0.49
Extraordinary Loss..... (0.09)
---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 0.36 $ 0.47 $ 1.48 $ 1.62 $ 0.58 $ (0.07) $ 1.01
========== ========== ========== ========== ========== ========== ==========
DIVIDENDS PER COMMON
SHARE.................. $ 0.14 $ 0.14 $ 0.56 $ 0.52 $ 0.50 $ 0.48 $ 0.46
BALANCE SHEET DATA
(AT PERIOD END):
Working Capital........ $ 660,773 $ 469,134 $ 251,168 $ 144,687 $ 171,451 $ 87,223 $ 140,351
Total Assets........... 4,377,298 4,617,133 5,384,595 4,110,330 2,897,692 2,734,243 1,943,968
Total Debt Excluding
Finance Subsidiaries
(1)................... 595,963 976,277 1,031,386 681,715 484,275 825,749 504,863
Total Debt of Finance
Subsidiaries.......... 1,301,034 908,168 1,127,026 817,585 464,882 414,241 300,509
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total Debt (1)......... 1,896,997 1,884,445 2,158,412 1,499,300 949,157 1,239,990 805,372
Shareholders Equity.... 1,404,457 1,941,746 2,255,504 1,891,362 1,384,473 1,034,687 872,991
</TABLE>
- --------
(1) Includes discontinued operations.
(2) Includes a pretax charge of $115 million ($95 million net of taxes or $.85
per share for the fiscal year) for the sale of the Company's investment in
IMM Office Systems GmbH.
(3) Adjusted to give retroactive effect to a two-for-one stock split effected
on November 9, 1995.
8
<PAGE>
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
IKON is currently authorized to issue 302,095,628 shares, consisting of
300,000,000 shares of Common Stock of no par value (hereinafter called "Common
Stock") and 2,095,628 shares of Preferred Stock of no par value (hereinafter
called "Serial Preferred Stock"). The Common Stock is subject to the express
terms of the Serial Preferred Stock. One series of Serial Preferred Stock is
outstanding (Series BB Preferred Stock), and additional series may be
authorized by the Board of Directors.
DIVIDEND RIGHTS
Common Stock. Dividends and other distributions of assets may be made with
respect to the Common Stock from time to time by the Board of Directors within
the limits and from the sources permitted by law after payment or provision
for payment of all accrued and unpaid dividends (which are cumulative) on the
Serial Preferred Stock, so long as there is no default in any sinking fund
provisions for the Serial Preferred Stock.
Preferred Stock. The Series BB preferred stock is entitled to payment of
annual per share dividends of $504.00 ($5.04 per Depository Share).
So long as any shares of Serial Preferred Stock are outstanding, the Company
may not (1) declare or pay any dividends (other than dividends payable in
Common Stock or other shares of IKON ranking junior to the Serial Preferred
Stock) to holders of Common Stock or shares of IKON or any other class ranking
on a parity with or junior to the Serial Preferred Stock, or (b) make any
distributions of assets (directly or indirectly, by purchase, redemption or
otherwise) to the holders of Common Stock or shares of IKON of any other class
ranking on a parity with or junior to the Serial Preferred Stock, except in
the case of shares purchased in compromise of claims, or to prevent loss on
doubtful debts and except in the case of shares purchased out of the proceeds
of the sale of Common Stock or other shares ranking junior to the Serial
Preferred Stock received by IKON:
(a) Unless all accrued and unpaid dividends on shares of Serial Preferred
Stock, including the full dividends for the then quarterly dividend
period, shall have been paid or declared and funds sufficient for
payment thereof set apart; and
(b) Unless there shall be no arrearages with respect to redemption of
shares of Serial Preferred Stock from any sinking fund provided
therefor.
No dividends may be paid upon or declared or set apart for any of the Serial
Preferred Stock for any quarterly dividend period unless at the same time a
like proportionate dividend for the same quarterly dividend period, ratably in
proportion to the respective annual dividend rates fixed therefor, shall be
paid upon or declared or set apart for all Serial Preferred Stock of all
series then issued and outstanding and entitled to receive such dividend.
PREEMPTIVE RIGHTS
Common Stock. The holders of Common Stock do not have any preemptive right
to purchase or have offered to them for purchase any shares or other
securities of IKON.
Preferred Stock. The only preemptive right of holders of Serial Preferred
Stock is to participate in certain distributions, if any were to be made by
IKON, to holders of Common Stock options or rights to acquire Common Stock, or
of evidences of IKON's debt or assets (other than cash).
PREFERRED SHARE PURCHASE RIGHTS
The Company's Board of Directors has adopted a Preferred Share Purchase
Rights Plan (the "Purchase Rights Plan") and has declared a dividend of one
right (a "Right") for each outstanding share of IKON Common Stock, which
Rights will attach to and trade with IKON Common Stock, except as described
below.
9
<PAGE>
In February, 1988, IKON declared and paid a dividend distribution of one
right for each outstanding share of Common Stock. The Rights become
exercisable ten days (or such later date, not beyond thirty days, as is fixed
by the Board of Directors) after the earlier of: (a) public announcement that
an individual or group has acquired or obtained the right to acquire 20% or
more of IKON's Common Stock or (b) an individual or group commences or
announces an intention to commence a tender or exchange offer that could
result in the acquisition of 30% or more of such securities (the "Separation
Date"). When exercisable, each Right entitles the holder to purchase one one-
hundredth of a share of IKON's Series 12 preferred stock for $75.00 (the
"Exercise Price"), subject to adjustment.
The Purchase Rights Plan further provides that if any person or group owning
20% or more of IKON's outstanding Common Stock (a) engages in certain self-
dealing practices with IKON, or (b) causes IKON to forgo or reduce quarterly
dividends or take an action which would result in a more than 2% increase in
the other entity's proportionate share of IKON's outstanding shares; or if any
person or group acquires 30% or more of IKON's outstanding stock, each Right
would entitle the holder thereof to acquire for the Exercise Price shares of
Common Stock having a market value equal to twice the Right's exercise price.
If IKON were acquired in a merger or other business combination, or if more
than 50% of its earning power or assets were sold in one transaction or a
series of transactions, each Right would entitle the holder thereof to
purchase shares of the acquiring company's common stock having a market value
equal to twice the Right's Exercise Price. The Rights that are or were held by
a person or group owning 20% or more of IKON's outstanding voting securities
become void if such person or group engages in an event which entitles holders
of the Rights to purchase Common Stock or common stock of the acquiring
company having a market value equal to twice the Right's Exercise Price.
The Rights, which expire on February 10, 1998, are non-voting and may be
redeemed by IKON at a price of $.05 per Right any time prior to ten days after
public announcement that a person has acquired 20% or more of IKON's
outstanding voting securities. Until the Separation Date, the Rights are
transferable with and only with the Common Stock.
VOTING RIGHTS
Common Stock. Subject to certain voting rights of holders of the Serial
Preferred Stock to vote in certain circumstances and with respect to certain
matters as a class, the holders of the Common Stock currently have full voting
rights upon all matters presented for shareholder action. Shareholders do not
have the right to cumulate votes in electing directors.
Preferred Stock. The holders of Serial Preferred Stock are entitled to one
vote per share, and except as otherwise provided by specific provisions of
IKON's Articles of Incorporation or by Ohio Law, to vote on all matters
together with the holders of Common Stock as one class. The holders of Serial
Preferred Stock are not entitled to cumulate votes in electing directors.
IKON's Articles of Incorporation provide that in the event of default in the
payment, in whole or in part, of six quarterly dividends on the Serial
Preferred Stock, whether or not consecutive, the holders of shares of Serial
Preferred Stock will be entitled to elect two directors, to serve in addition
to the directors otherwise elected. Such right to elect additional directors
is in lieu of all other rights of the holders of the Serial Preferred Stock to
vote for directors, and will remain in effect until no quarterly dividend is
in default. It is also provided that the vote or the written consent of at
least two-thirds of the outstanding shares of Serial Preferred Stock voting as
a class is necessary to effect (i) any amendment, alteration or repeal of any
of the provisions of the Articles of Incorporation or the Code of Regulations
of IKON which affects the voting powers, rights or preferences of the holders
of the Serial Preferred Stock, (ii) the authorization or issue of any stock,
or any security convertible into any stock, ranking prior to the Serial
Preferred Stock, (iii) the purchase or redemption of less than all the Serial
Preferred Stock then outstanding (except in accordance with a stock purchase
offer made to all holders of Serial Preferred Stock) when any dividends or
sinking fund obligations on the Serial Preferred Stock are in arrears, or (iv)
the sale, lease or conveyance by IKON of all or substantially all of its
property or business, its voluntary liquidation or dissolution, or its
consolidation with or merger into any
10
<PAGE>
other corporation, unless the resulting corporation will have no shares
authorized or outstanding ranking prior to or on a parity with the Serial
Preferred Stock except the same number with the same rights and preferences as
those of IKON authorized and outstanding immediately preceding such
consolidation or merger, and unless each holder of Serial Preferred Stock
immediately prior thereto receives the same number of shares, with the same
rights and preferences, of the resulting corporation. It is further provided
that the vote or written consent of two-thirds of the holders of shares or any
series is necessary to amend the Articles of Incorporation or Code of
Regulations of IKON in such a way as to affect adversely and particularly the
preferences, rights, powers or privileges of such series. No such vote or
consent is required if provision has been made for the redemption of all of
the Serial Preferred Stock or any series thereof.
In addition, IKON may not create additional classes of stock, increase the
authorized number of shares of Serial Preferred Stock or issues series of
preferred stock ranking on a parity with the Serial Preferred Stock with
respect, in each case, to the payment of dividends and amounts upon
liquidation, dissolution and winding up without the vote or written consent of
at least a majority of the outstanding shares of Preferred Stock voting as a
class.
REDEMPTION PROVISIONS AND SINKING FUND
Common Stock. The Common Stock is not redeemable.
Preferred Stock. The directors are empowered to determine any redemption
rights and price of each series of the Serial Preferred Stock. The Series BB
preferred stock and the depository shares representing such stock are not
redeemable.
CONVERSION RIGHTS
Common Stock. The Common Stock is not convertible into any other security.
Preferred Stock. The directors are empowered to determine whether the shares
of any series of the Serial Preferred Stock will be convertible into Common
Stock, and if so, the conversion price or prices and the other terms or
provisions of such rights, Series BB preferred shares are convertible at the
option of the holder at a rate of 204.68 shares of common stock per share
(2.0468 shares of Common Stock per depository share) until October 1, 1998, at
which time each share will automatically convert to a number of shares of
Common Stock determined by an exchange rate which will vary based on the
market price of the Common Stock per depository share. The conversion rights
with respect to Serial Preferred Stock are subject to proportionate adjustment
if IKON combines or splits the outstanding shares of Common Stock or pays a
dividend in Common Stock. Shares of Serial Preferred Stock which have been
converted must be retired and may not be reissued.
LIQUIDATION RIGHTS
Common Stock. The holders of Common Stock are entitled pro rata to the
assets of IKON in the event of voluntary or involuntary liquidation, subject
to the rights of creditors and the rights of the holders of the Serial
Preferred Stock to receive certain per share amounts plus accrued unpaid
dividends.
Preferred Stock. In the event of voluntary or involuntary liquidation, the
holders of Series BB preferred stock are entitled to receive $7,737.50 per
share ($77.375 per depository share) plus accrued unpaid dividends. The Serial
Preferred Stock has priority over the Common Stock on any liquidation,
dissolution or winding up to the extent of the liquidation price plus any
accrued unpaid dividends. The directors have authority in establishing any
series to determine the liquidation price for each series in the event of any
liquidation, dissolution or winding up.
11
<PAGE>
LIABILITY FOR ASSESSMENT
Outstanding shares of the Common and Serial Preferred Stock are fully paid
and non-assessable.
IKON COMMON STOCK: OHIO ANTITAKEOVER PROVISIONS
Holders of shares of IKON Common Stock are entitled to one vote per share on
all matters to be voted upon by the stockholders and are not entitled to
cumulate votes for the election of directors. Subject to preferences that may
be applicable to any outstanding Preferred Stock, holders of shares of IKON
Common Stock are entitled to receive ratably such dividends, if any, as may be
declared from time to time by the IKON Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution or winding up of
IKON, the holders of shares of IKON Common Stock are entitled to share ratably
in all assets remaining after payment of liabilities, subject to prior
distribution rights of Preferred Stock, if any, then outstanding. IKON is
subject to the provisions of Chapter 1704 of the Ohio Law which regulates
transactions by public corporations (such as IKON) involving interested
shareholders. Subject to certain exceptions, Chapter 1704 prohibits a publicly
held Ohio corporation from engaging in a Chapter 1704 Transaction (as
hereinafter defined) with an interested shareholder for a period of three
years after the date of the transaction in which the person became an
interested shareholder. Subject to certain exceptions, an interested
shareholder is a person who, together with affiliates and associates, owns, or
within three years did own 10% or more of the corporation's voting stock. A
Chapter 1704 Transaction includes, but is not limited to, a merger,
consolidation, combination, purchase or sale of assets having an aggregate
fair market value in excess of 5% of either the aggregate market value of the
consolidated assets of the corporation or the aggregate market value of all
the outstanding stock of the corporation, or 10% of the earning power and
income of the corporation (on a consolidated after-tax basis), and certain
transactions that would increase the interested shareholder's proportionate
share ownership in the corporation or which provide the interested shareholder
with a financial benefit. These restrictions do not apply where (i) the
Chapter 1704 Transaction or the transaction in which the shareholder becomes
interested is approved by the corporation's Board of Directors prior to the
date the interested shareholder acquired its shares, or (ii) under certain
other circumstances enumerated in Chapter 1704 of the Ohio Law. The Chapter
1704 Transaction provisions of Chapter 1704 of the Ohio Law may have the
effect of deterring merger proposals, tender offers or other attempts to
effect changes in control of the Company that are not negotiated with and
approved by the Board of Directors.
LEGAL OPINIONS
The validity of the issuance of the shares of Common Stock offered hereby is
being passed upon for IKON by Ballard Spahr Andrews & Ingersoll, Philadelphia,
Pennsylvania.
EXPERTS
The consolidated financial statements of IKON Office Solutions, Inc.
incorporated by reference in IKON's Annual Report (Form 10-K) for the year
ended September 30, 1996 and the related financial statement schedule included
therein, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon included or incorporated by reference therein
and incorporated herein by reference. Such consolidated financial statements
are incorporated herein by reference in reliance upon such reports given upon
the authority of such firm as experts in accounting and auditing.
12
