SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 21, 1999
IKON Office Solutions, Inc.
(Exact name of registrant as specified in its charter)
OHIO File No. 1-5964 23-0334400
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
P.O. Box 834, Valley Forge, Pennsylvania 19482
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (610) 296-8000
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
On October 21, 1999, the Registrant announced its expectation, based on
preliminary information, that its earnings would not meet the First Call
consensus estimate of $.22 per share for the fiscal fourth quarter ended
September 30, 1999, and further announced that such earnings were expected to be
in the range of $.13 to $.15 per share. The Registrant's press release dated
October 21, 1999 containing further detail is attached.
On October 21, 1999, the Registrant also announced that Robert M.
Furek, Thomas R. Gibson, and Arthur E. Johnson had been elected to IKON's Board
of Directors. The Registrant's press release dated October 21, 1999 containing
further detail is attached.
On October 27, 1999, the Registrant announced its earnings for the
fiscal fourth quarter and year ended September 30, 1999. The Registrant's press
release dated October 27, 1999 containing further detail is attached.
This Report includes or incorporates by reference information which may
constitute forward-looking statements within the meaning of the federal
securities laws including, but not limited to: statements concerning expected
revenue growth, cost savings and increased margins resulting from the
Registrant's growth and productivity initiatives; and statements concerning
special charges, cash impact and expected savings relating to certain planned
asset dispositions and consolidations. Although the Registrant 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 statements are based upon management's current plans or
expectations and are subject to a number of risks and uncertainties, including,
but not limited to: risks and uncertainties relating to conducting operations in
a competitive environment and a changing industry; 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 Registrant's 1998 Annual Report on Form
10-K/A 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
Registrant.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
c. The following exhibits are furnished in accordance with the provisions of
Item 601 of Regulation S-K:
(99) Press Release dated October 21, 1999
(99.1) Press Release dated October 21, 1999
(99.2) Press Release dated October 27, 1999
<PAGE>
SIGNATURE
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.
IKON OFFICE SOLUTIONS, INC.
By: /s/ WILLIAM S. URKIEL
William S. Urkiel
Senior Vice President and
Chief Financial Officer
Dated: October 27, 1999
EXHIBIT 99
Contacts:
Susan G. Gaffney Veronica L. Rosa
Investor Relations Investor Relations
610-408-7292 610-408-7196
[email protected] [email protected]
IKON OFFICE SOLUTIONS COMMENTS
ON FOURTH QUARTER
Earnings for Fiscal 4th Quarter Will Not Meet Analysts' Consensus
Company Cites Lower-Than-Anticipated Revenues and
Underperformance in Two Business Units
Company Will Expand and Accelerate Actions to Address Revenue Growth and
Underperforming Operations
Valley Forge, Pennsylvania - October 21, 1999 -- IKON Office Solutions (NYSE:
IKN) announced today that, based on preliminary information, the Company expects
that its earnings will not meet the First Call consensus estimate of $.22 per
share for the fiscal fourth quarter ended September 30, 1999. The Company
expects earnings to be in the range of $.13 to $.15 per share.
Commenting on the fourth quarter, James J. Forese, President and Chief Executive
Officer, said, "The shortfall in earnings for the 1999 fourth quarter resulted
primarily from lower-than-expected revenues, which are expected to be down
approximately 2% from the 1999 third quarter level. This is due, in part, to
higher than expected sales force attrition, limited digital product
availability, and reduced demand for analog product in our copier business. In
addition, there has been continued operating weakness in two of the Company's
business units, Technology Services and Document Services." Mr. Forese said that
the Company will provide additional detail on its earnings and its action plan
for growth when it reports financial results for the fourth quarter and fiscal
1999 on October 27.
Mr. Forese added, "There is no question that the current operating environment
is tough for our entire industry, as buying patterns change in response to the
digital revolution and competitive forces. IKON is addressing these challenges
by intensifying its focus on services and solutions to wrap around its high-end,
digital and color products.
"Last year, when I assumed the position of CEO, I said that I would take
whatever actions were necessary to capitalize on the Company's many strengths
and build shareholder value. Initially, my top priority was to cut
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costs, improve productivity and establish strong controls and discipline
throughout the Company. There can be no doubt that we have been making
substantial progress in these areas.
"Now, however, our fundamental objective is growth. Clearly, we need to take
much more aggressive steps to boost overall revenues and address the
underperformance issues in our Technology Services and Document Services
operations. I intend to do just that in order to meet the challenges that IKON
and the industry are facing. The work we need to do is well under way and, next
week in our formal earnings announcement, we will provide more detail on our
plan and the outlook for fiscal 2000."
IKON Office Solutions (www.ikon.com) is one of the world's leading office
technology companies, providing customers with total office solutions from
copier and printing systems, computer networking and digital document services
to copy center management, technology training and electronic file conversion.
With fiscal 1998 revenues of $5.6 billion, IKON has more than 1,000 locations in
the U.S., Canada, Mexico, the United Kingdom, France, Germany and Denmark.
This news release includes information that may constitute forward-looking
statements made pursuant to the safe harbor provisions of the federal securities
laws. Although IKON believes the expectations contained in such forward-looking
statements are reasonable, it can give no assurance that such expectations will
prove correct. This information is subject to risk and uncertainties such as
those relating to conducting activities in a competitive environment and a
changing industry; 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. Therefore, actual results may differ materially
from the forward-looking statements.
Exhibit 99.1
Contacts:
Susan G. Gaffney Veronica L. Rosa Steven K. Eck
Investor Relations Investor Relations Media Relations
610-408-7292 610-408-7196 610-408-7295
[email protected] [email protected] [email protected]
IKON OFFICE SOLUTIONS ADDS THREE NEW DIRECTORS
ROBERT M. FUREK, THOMAS R. GIBSON AND ARTHUR E. JOHNSON
ELECTED TO THE BOARD
Valley Forge, Pennsylvania - October 21, 1999 - IKON Office Solutions (NYSE:
IKN) today announced the election of three new members to its Board of Directors
- - Robert M. Furek, Thomas R. Gibson, and Arthur E. Johnson - effective
immediately, bringing the total number of Board members to ten.
"These three people have long been leaders in their industries and bring a
wealth of knowledge and experience to IKON's Board," stated James J. Forese,
President and Chief Executive Officer of IKON Office Solutions. "We look forward
to working with them and benefiting from the strategic management, operations
and marketing skills they offer IKON."
Robert M. Furek, 56, is presently Chairman of the Board of Trustees overseeing
the Hartford School System as Connecticut Governor John Rowland's appointee for
a three-year term. He is also a partner in Resolute Partners, a private equity
investment firm. Previously, Furek served as President and Chief Executive
Officer for Heublein, Inc., before retiring from the firm three years ago after
26 years with the company. He is a member of the Board of Directors of the
Massachusetts Mutual Life Insurance Company and the Dexter Corporation. He is
also a trustee of Kingswood-Oxford School and serves on the Executive Committee
of the Greater Hartford Arts Council. He was formerly a trustee of Colby College
and was a founding director of "Drugs Don't Work." Formerly, Furek was a
director of the Connecticut Bank & Trust Company, the Connecticut Mutual Life
Insurance Company, the Greater Hartford Chamber of Commerce and the Hartford
Chapter of the American Red Cross. He earned his bachelor's degree from Colby
College and an MBA from Columbia University.
<PAGE>
Thomas R. Gibson, 56, a thirty-year veteran of the automotive industry, is the
Chairman and Chief Executive Officer of the Asbury Automotive Group, comprised
of 74 regional dealership groups headquartered in Conshohocken, PA. Gibson began
his career with the Ford Motor Company in 1967, was Director of Marketing for
Chrysler Corporation from 1980 to 1982, and was President and Chief Operating
Officer of Subaru America. Gibson is a graduate of DePauw University and earned
his MBA from Harvard University. He is a former trustee of DePauw University and
Glassboro State College and former board member of the U.S. Ski Team and
Children's Hospital of Philadelphia.
Arthur E. Johnson, 52, Vice President Corporate Strategic Development for
Lockheed Martin Corporation, directs the strategic development and planning for
the Lockheed Martin Corporation, a $26 billion global enterprise which is
principally engaged in research, design, development, manufacture and
integration of advanced-technology systems, products, and services. Prior to
assuming his current position in October 1999, Johnson was President and Chief
Operating Officer of Lockheed Martin's Information and Services Sector, a $5
billion global provider of information technology services and solutions. He
began his career as a software engineer for IBM in 1969, rising to the position
of President and Chief Operating Officer of IBM Federal Systems Division in
1992. In 1993, President Clinton appointed Johnson to a three-year term on the
Defense Science Board and to the President's Advisory Council on Historically
Black Colleges and Universities. Johnson is a graduate of Morehouse College in
Atlanta, GA.
IKON Office Solutions (www.ikon.com) is one of the world's leading office
technology companies, providing customers with total office solutions from
copier and printing systems, computer networking and digital document services
to copy center management, technology training and electronic file conversion.
With fiscal 1998 revenues of $5.6 billion, IKON has more than 1,000 locations
including the U.S., Canada, Mexico, the United Kingdom, France, Germany and
Denmark.
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Exhibit 99.2
Contacts:
Susan G. Gaffney Veronica L. Rosa
Investor Relations Investor Relations
610-408-7292 610-408-7196
[email protected] [email protected]
IKON OFFICE SOLUTIONS ANNOUNCES FOURTH QUARTER AND FULL YEAR RESULTS
Conversion of Analog to Digital, Key to Future Growth,
Continues To Accelerate
Company Taking Aggressive Actions To Increase Revenue Growth
Valley Forge, Pennsylvania - October 27, 1999 - IKON Office Solutions (NYSE:
IKN) today reported results for the fourth quarter and fiscal year ended
September 30, 1999.
Earnings for the fourth quarter ended September 30, 1999, were $21.7
million, or $.15 per share. Revenues for the fourth quarter were $1.37 billion,
a decline of 1.3% from the third quarter of 1999.
Transition to Digital Continues to Accelerate
"There is no question that the current operating environment is tough
for our entire industry," said James J. Forese, President and Chief Executive
Officer. "Buying patterns are changing in response to technological advances and
intense competitive forces. The key dynamic in our markets right now is the
rapid transition from analog to digital. For IKON, the pace of that transition
continued to accelerate in the fourth quarter, as we benefited from the third
quarter introduction of the new Canon digital offering. In fact, IKON's new
equipment revenue is now 69% digital and 31% analog, and digital black and white
revenue in the fourth quarter was up 111% from the same period last year. For
the whole year, digital black and white revenue was twice as much as it was in
fiscal 1998. The strategy of converting the base to digital is critical to the
long-term success of our services
<PAGE>
model, because conversion provides the annuity stream to fund the evolution of
this model and develops the customer relationships through which we can sell
services.
"Although we've made great progress during 1999 in expanding our
digital offerings and instituting a new sales model that defines markets by
customer need rather than simply by geographic location, our fourth quarter
results fell short of expectations. Earnings for the quarter were down due
primarily to lower-than-anticipated revenues and the underperformance of certain
operations in two of our business units, Technology Services and Document
Services," Mr. Forese added.
Revenues, Mr. Forese said, were negatively impacted by:
o higher-than-anticipated sales force attrition, resulting in a shortage
of almost 250 representatives as IKON enters the first quarter;
o an increased backlog in Canon digital products;
o the delay by some customers in purchasing decisions due to concerns
about Y2K issues; and
o a 3% decrease in service and rental revenue as a result of
underperformance in some Document Services and Technology Services
units and lower copy volumes due to a de-emphasis of the Company's
segments 1 and 2 equipment base.
Fiscal 1999 Results
For fiscal 1999, the Company generated net income of $100.6 million, or
$.67 per diluted share, including a gain from asset securitization of $14.3
million, or $.06 per share. This compares to a net loss of $83 million, or $.76
per share, for fiscal 1998. Fiscal 1998 results include transformation and
special charges of $230.4 million, or $1.16 per share; excluding these items,
fiscal 1998 net income would have been $73.9 million or $.40 per share. Revenues
for fiscal 1999 decreased 1.9% to $5.5 billion from $5.6 billion in fiscal 1998.
The full year decline is due primarily to the elimination of unprofitable
revenue streams and a reduction in the sales force of close to 1,000
representatives.
Actions To Address Marketplace Changes and Spur Growth
Mr. Forese stated, "We are taking a number of actions to address the
challenges that IKON, and to a great extent the industry as a whole, are
facing." These initiatives for fiscal 2000, he said, are designed to stimulate
revenue growth by:
o Building an increasingly robust product line - adding to our
outstanding portfolio of digital and color products from Ricoh and
Canon;
<PAGE>
o Accelerating our introduction of diverse high-value-added services to
aid in integrating and optimizing high-end office equipment. The
service portfolio will be expanded through alliances for image capture
and creation, further integration of IKON's Digital Express network,
expansion of Information Technology "help desk" and network analysis
services, and development of a document repository service;
o Adding 400-500 salespeople, including 300-400 in the high volume,
color and major accounts areas, as well as approximately 100 in
management services;
o Reducing attrition in the sales force through new training and
recruitment programs started in fiscal 1999;
o Continuing the roll-out of the new sales model introduced at the
beginning of fiscal 1999, which focuses on customer needs and provides
tools for sales and analysis;
o Accelerating telemarketing and e-commerce initiatives;
o Focusing the sales force on protecting the low-end customer base for
the purpose of converting it to digital or up-market products;
o Launching a global branding campaign to promote revenue growth and
protect the existing customer base;
o Accelerating productivity initiatives, including a "shared services"
program to consolidate all field accounting nationwide at two U.S.
centers and a supply chain management project to establish a
nationwide organization to monitor and manage product planning and
procurement and inventory control; and
o Consolidating and disposing of unproductive assets. Over the next 60
to 90 days, IKON will identify and quantify the specific costs to be
charged in the first quarter of year 2000 to dispose of certain
underperforming operations, consolidate real estate and provide for
employee severance payments related to these dispositions and the
productivity programs cited above.
Near-term Outlook
Mr. Forese said, "We expect to see continuing acceleration of the trend
to digital along with a decline of the analog base. We also expect to see growth
in key business segments, including facilities management, color, mid-range and
high volume.
"Given industry trends, we anticipate that fiscal 2000 is going to be
a difficult year. We anticipate revenue will grow 1-2% for the year, and that
earnings per share will be $.75 to $.85 before any special charges. We believe
the productivity initiatives and asset dispositions will produce long-term
savings for the Company but are expected to result in charges of approximately
$100-$125 million in the first quarter of fiscal year 2000. The cash impact of
the charge is expected to be
<PAGE>
approximately half of that total. Long-term savings from these dispositions and
productivity initiatives are anticipated to be approximately $50 to $65 million
on an annualized basis.
"The essential challenges to our industry at this time," Mr. Forese
stated, "are the threat of price deterioration; the need to adapt to digital and
services sales models that require increasingly sophisticated personnel and have
longer selling cycles; changes in distribution channels; and excess capacity.
Against these challenges, this company is building an increasingly competitive
position for the long term. We have made substantial progress in cutting costs,
imposing operating and financial disciplines, consolidating operations and
focusing on productivity initiatives. We have also stabilized this organization.
Now, we must concentrate primarily on revenue growth.
"When I became Chief Executive Officer, I said I would take whatever
actions might prove to be necessary to develop the potential of this Company,
root out its problems and overcome the challenges confronting the industry. I
believe we are doing just that," Mr. Forese concluded.
IKON Office Solutions (www.ikon.com) is one of the world's leading
office technology companies, providing customers with total office solutions
from copier and printing systems, computer networking and digital document
services to copy center management, technology training and electronic file
conversion. With fiscal 1999 revenues of $5.5 billion, IKON has more than 1,000
locations including the United States, Canada, Mexico, the United Kingdom,
France, Germany and Denmark.
This news release includes information which may constitute forward-looking
statements within the meaning of the federal securities laws, including, but not
limited to: statements concerning expected revenue growth, cost savings and
increased margins resulting from IKON's growth and productivity initiatives; and
statements concerning special charges, cash impact and expected savings relating
to certain planned asset dispositions and consolidations. Although IKON 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 statements are based upon management's current plans or
expectations and are subject to a number of risks and uncertainties, including,
but not limited to, risks and uncertainties relating to conducting operations in
a competitive environment and a changing industry; 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 IKON's 1998 Annual Report on Form 10-K/A
filed with the Securities and Exchange Commission. As a consequence of these and
other risks and uncertainties, IKON's current plans, anticipated actions and
future financial condition and results may differ materially from those
expressed in any forward-looking statements.
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