Exhibit 99
Contacts:
Veronica Rosa Steve Eck
Investor Relations Media Relations
610-408-7196 610-408-7295
[email protected] [email protected]
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IKON OFFICE SOLUTIONS ANNOUNCES
FOURTH QUARTER AND YEAR END RESULTS
Amid Industry Changes, Core Business Continues to Grow Market Share
Free Cash Flow Exceeds Targets for Year
Valley Forge, Pennsylvania - October 26, 2000 - IKON Office Solutions (NYSE:
IKN) today reported results for the fourth quarter and fiscal year ended
September 30, 2000. Earnings for the fourth quarter ended September 30, 2000,
were $18.2 million, or $.13 per share, including a gain from discontinued
operations of $.01, compared to a loss for the fourth quarter ended September
30, 1999, of $(.30) per share, including a special litigation charge of $(.45)
per share. Revenues for the fourth quarter were $1.37 billion, an increase of
2.2% from the prior year. Without the negative effect of foreign currency
translation, revenue growth for the quarter would have been 3.2%. Free cash flow
was in excess of $200 million, which exceeded the Company's target for the year
of $158 million.
Fourth Quarter Results
"The investments we have made to strengthen our field organization over the
last few years are paying off and should continue to provide opportunity for
IKON as the marketplace moves towards a greater focus on solutions and
services," said James J. Forese, Chairman and CEO. "Compared to last year, we
saw continued strength in critical areas of our base equipment business,
including 10% growth in equipment revenues worldwide. Our digital equipment base
continues to grow, with the placement of digital products representing 88% of
total copier and printer revenues, compared to 69% a year ago. We also continue
to extend our market reach toward higher-end solutions. However, during our
fourth quarter, we experienced the negative impact of price pressure on
equipment sales associated with current industry dynamics.
"Revenues from facilities management in IKON North America exceeded our run rate
objective for the year of 25% growth, largely due to synergies created between
business lines as the Company focuses on greater integration of its services."
Revenues from Net Sales, consisting of equipment revenues, technology related
hardware, supplies and wholesale, grew 2.9% in the quarter compared to last
year. The sale of equipment continued to be strong,
<PAGE>
particularly in IKON North America where revenue growth was 14% compared to last
year, following similar results in the second and third quarters of this fiscal
year. Consistent with the Company's strategy of moving toward higher-end
solutions, placements of segment 3-6 equipment in IKON North America increased
9% from the prior year, led by the Ricoh 850 segment 5 digital copier and the
Canon imageRUNNER 110, IKON's first segment 6 digital copier/printer offering.
Moderating this growth was a decline in hardware revenues in technology
services, due to a shift in customers' buying patterns for these products and
the effects of restructuring actions announced during the fiscal year. Gross
margins on Net Sales declined from the prior year, due primarily to increased
price pressure in equipment sales.
Service & Rentals revenues, which include equipment service, outsourcing, and
technology service revenues, declined approximately 1% from the prior year. This
decline reflects restructuring actions taken throughout the year to streamline
the Company's document production service operations as well as to close certain
underperforming units providing document production services and technology
services. Fourth quarter revenues were also affected by the Company's strategic
shift in the service base associated with equipment sales, as well as summer
seasonality. Although gross profit in equipment service was strong, gross
margins in Service & Rentals overall experienced a decline due primarily to
lower revenue mix from equipment service.
Finance income from the Company's leasing operations showed 26% growth year over
year due to the use of on-balance sheet, asset-backed securitizations to finance
new growth, as well as the continued use of leasing as a flexible offering for
its customers. Since the fourth quarter of last year, the percentage of
equipment internally financed by IOS Capital has increased from 66% to 72%.
Selling and Administrative expense as a percentage of revenues declined from the
prior year, despite increased investments in selling in order to capture new
market opportunities in higher-end segments, as well as training, branding, and
up-front costs associated with implementing productivity initiatives. During the
fourth quarter, the Company added 120 sales representatives, bringing the year
to date count to 600 - well in excess of the Company's previously stated goal of
400-500. Approximately 46% of the Company's new hires have been added in the
last two fiscal quarters.
Fiscal 2000 Results
For fiscal 2000, the Company generated net income of $29.1 million, or $.20 per
share, including restructuring charges and special gains. Excluding these
charges and gains, the Company generated net income of $93.1 million, or $.63
per share. This compares to fiscal 1999 net income of $92.0 million, or $.62 per
share, excluding the shareholder litigation settlement charge of $(.45) per
share and special gains of $.06 per share. Revenues for fiscal 2000 of $5.4
billion were essentially flat compared to the prior year, reflecting growth in
focused areas of investment, particularly 8% growth in the sale of office
equipment worldwide, less revenues associated with restructuring actions of
approximately $100 million.
<PAGE>
During fiscal 2000, the Company repurchased a total of 5.4 million shares under
both the 1997 and 2000 stock repurchase authorizations.
Commenting on the Company's full year results, Forese said, "We had a number of
key initiatives and objectives for fiscal 2000 that will enhance our ability to
gain market share and share of customers through expanded services. Among these
were to expand sales coverage, broaden our service offerings with e-services
such as Digital Express(R) 2000, and Virtual File Room(TM), and the expansion of
our higher-end product line. Our continued focus on the right product and
service offerings and strong customer relationships will set us apart from
others in the industry.
Near Term Outlook
"It is clear that we have been affected by competitive pressures that impact our
business," Forese said. "We believe these conditions will continue into next
year. Therefore, at this time, we expect our earnings for next fiscal year to be
in the $.55 - $.65 per share range, based on expected revenue growth of 2-4%. We
believe revenues will grow in excess of this range in our base equipment
business; however, this growth will be somewhat offset by potential shifts in
revenue mix as we continue to move forward with our integrated, digital
solutions model.
"In addition, we will continue to focus on execution and leveraging the many
investments we have already made to grow this business, and we will be making
additional investments that are necessary for IKON to capture shifting and
growing opportunities in new spaces, such as Digital Express(R) 2000, expanded
e-commerce implementation, and execution of our network printer offering.
"IKON's strategic direction is sound. Despite industry dynamics, we are making
progress and we will continue to be focused on execution," Forese said.
================================================================================
The Company will host a conference call at 10:00 a.m. Eastern Daylight Time on
Thursday, Oct. 26, to review its fourth quarter results. Please call 719
457-2602 to participate. A complete replay of the conference call will be
available over the Internet on IKON's investor relations home page approximately
one hour after the call ends; to listen, please go to (www.ikon.com) and click
on Invest in IKON.
================================================================================
IKON Office Solutions (www.ikon.com) is one of the world's leading providers of
products and services that help businesses communicate. IKON provides customers
with total business solutions for every office, production and outsourcing need,
including copiers and printers, color solutions, distributed printing,
facilities management, imaging and legal outsourcing solutions, as well as
network design and consulting, application development and technology training.
With fiscal 2000 revenues of $5.4 billion, IKON has approximately 900 locations
worldwide including the United States, Canada, Mexico, the United Kingdom,
France, Germany, Ireland, and Denmark.
<PAGE>
This news release includes information which may constitute forward-looking
statements within the meaning of the federal securities laws. These
forward-looking statements include, but are not limited to: statements relating
to expected earnings, profit margins and revenue growth for fiscal 2001;
increased equipment sales; IKON's ability to gain customers and market share and
expected benefits from IKON's strategic investments and initiatives. 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 1999 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.
# # #
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Fourth Quarter Fiscal
---------------------------------
2000 1999 % Change
-------------- -------------- -----------
<S> <C> <C> <C>
Revenues
Net sales $ 714,246 $ 693,972 2.9 %
Service and rentals 569,009 577,780 (1.5)
Finance income 90,191 71,860 25.5
--------------------------------------------------------------------------------------------------------
1,373,446 1,343,612 2.2
--------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 482,077 458,845 5.1
Service and rental costs 344,386 341,886 0.7
Finance interest expense 44,851 34,137 31.4
Selling and administrative 454,172 452,447 0.4
Shareholder litigation settlement 101,106
Reversal of restructuring accrual, net (172)
--------------------------------------------------------------------------------------------------------
1,325,314 1,388,421 (4.5)
--------------------------------------------------------------------------------------------------------
Operating income (loss) 48,132 (44,809)
Gain on sale of investment 451
Interest expense 17,887 15,652 14.3
--------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes (benefit) 30,696 (60,461)
Income taxes (benefit) 13,874 (15,476)
--------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 16,822 (44,985)
Discontinued operations, net of income taxes 1,415
--------------------------------------------------------------------------------------------------------
Net income (loss) $ 18,237 $ (44,985)
============= =============
Basic Earnings (Loss) Per Common Share $0.13 ($0.30)
============= =============
Diluted Earnings (Loss) Per Common Share $0.13 ($0.30)
============= =============
Weighted Average Common Shares Outstanding, Basic 145,375 148,958
============= =============
Weighted Average Common Shares Outstanding, Diluted 145,375 148,958
============= =============
Operations Analysis:
Gross profit %, net sales 32.5% 33.9%
Gross profit %, service and rentals 39.5% 40.8%
Gross profit %, finance subsidiaries 50.3% 52.5%
Total gross profit % 36.6% 37.9%
Selling and administrative as a % of revenue 33.1% 33.7%
Operating income as a % of revenue 3.5% NA
Certain prior year amounts have been reclassifed to conform with current year
presentation. Fourth quarter fiscal 1999 net sales and cost of goods sold
have each been decreased by $23,998 from amounts previously reported. The
effect on revenue and cost of goods sold in the fourth quarter of fiscal
2000 is $27,683. In addition, the previously reported quarters have been
reclassified for the following amounts:
2000 1999
------------------ ------------------
Quarter ended December 31, $ 16,379 $ 19,696
Quarter ended March 31, 19,462 22,671
Quarter ended June 30, 20,893 20,177
</TABLE>
There was no impact on operating income, net income or earnings per share on
any quarter as a result of the above.
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
EXCLUDING SPECIAL ITEMS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fourth Quarter Fiscal
-----------------------------------------
2000 * 1999 ** % Change
----------------- ------------------ -------------
Revenues
Net sales $ 714,246 $ 693,972 2.9
Service and rentals 569,009 577,780 (1.5)
Finance income 90,191 71,860 25.5
------------------------------------------------------------------------------------------------
1,373,446 1,343,612 2.2
------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 482,077 458,845 5.1
Service and rental costs 344,386 341,886 0.7
Finance interest expense 44,851 34,137 31.4
Selling and administrative 454,172 452,447 0.4
------------------------------------------------------------------------------------------------
1,325,486 1,287,315 3.0
------------------------------------------------------------------------------------------------
Operating income 47,960 56,297 (14.8)
Interest expense 17,887 15,652 14.3
------------------------------------------------------------------------------------------------
Income before income taxes 30,073 40,645 (26.0)
Income taxes 13,232 18,900 (30.0)
------------------------------------------------------------------------------------------------
Net income $ 16,841 $ 21,745 (22.6)
================= ==================
Basic Earnings Per Common Share $0.12 $0.15
================= ==================
Diluted Earnings Per Common Share $0.12 $0.15
================= ==================
Weighted Average Common Shares Outstanding, Basic 145,375 148,958
================= ==================
Weighted Average Common Shares Outstanding, Diluted 145,375 149,119 ***
================= ==================
Operations Analysis:
Gross profit %, net sales 32.5% 33.9%
Gross profit %, service and rentals 39.5% 40.8%
Gross profit %, finance subsidiaries 50.3% 52.5%
Total gross profit % 36.6% 37.9%
Selling and administrative as a % of revenue 33.1% 33.7%
Operating income as a % of revenue 3.5% 4.2%
* Fourth quarter fiscal 2000 excludes $451 gain on sale of investment; $172
net reversal of restructuring accrual and $2,526 benefit from discontinued
operations ($1,415 after-tax).
** Fourth quarter fiscal 1999 excludes $101,106 for the shareholder litigation
settlement.
*** As a result of exclusion, shares that were previously excluded because of a
net loss, are now included in the diluted earnings per share calculation.
Certain prior year amounts have been reclassifed to conform with current year
presentation. Fourth quarter fiscal 1999 net sales and cost of goods sold
have each been decreased by $23,998 from amounts previously reported. The
effect on revenue and cost of goods sold in the fourth quarter of fiscal 2000
is $27,683. In addition, the previously
reported quarters have been reclassified for the following amounts:
2000 1999
----------------- ------------------
Quarter ended December 31, $ 16,379 $ 19,696
Quarter ended March 31, 19,462 22,671
Quarter ended June 30, 20,893 20,177
</TABLE>
There was no impact on operating income, net income or earnings per share on
any quarter as a result of the above.
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended September 30,
-----------------------------------------
2000 1999 % Change
----------------- ------------------ --------------------
Revenues
Net sales $ 2,794,882 $ 2,778,256 0.6 %
Service and rentals 2,306,783 2,360,274 (2.3)
Finance income 345,280 297,072 16.2
-------------------------------------------------------------------------------------------------------
5,446,945 5,435,602 0.2
-------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,864,318 1,861,024 0.2
Service and rental costs 1,393,093 1,373,097 1.5
Finance interest expense 167,700 126,676 32.4
Selling and administrative 1,785,751 1,823,083 (2.0)
Shareholder litigation (insurance recovery) settlement (17,000) 101,106
Restructuring and asset impairment charge 105,168
-------------------------------------------------------------------------------------------------------
5,299,030 5,284,986 0.3
-------------------------------------------------------------------------------------------------------
Operating income 147,915 150,616 (1.8)
Gain on sale of investment 3,739
Interest expense 69,821 71,225 (2.0)
-------------------------------------------------------------------------------------------------------
Income from continuing operations before income taxes
and extraordinary gain 81,833 79,391 3.1
Income taxes 55,873 45,555 22.6
-------------------------------------------------------------------------------------------------------
Income from continuing operations before extraordinary gain 25,960 33,836 (23.3)
Discontinued operations, net of income taxes 1,415
-------------------------------------------------------------------------------------------------------
Income before extraordinary gain 27,375 33,836
Extraordinary gain from early extinguishment of
debt, net of income taxes 1,707
-------------------------------------------------------------------------------------------------------
Net income $ 29,082 $ 33,836 (14.1)
================= ==================
Basic Earnings Per Common Share $0.20 $0.23
================= ==================
Diluted Earnings Per Common Share $0.20 $0.23
================= ==================
Weighted Average Common Shares Outstanding, Basic 148,207 148,673
================= ==================
Weighted Average Common Shares Outstanding, Diluted 148,327 149,003
================= ==================
Operations Analysis:
Gross profit %, net sales 33.3% 33.0%
Gross profit %, service and rentals 39.6% 41.8%
Gross profit %, finance subsidiaries 51.4% 57.4%
Total gross profit % 37.1% 38.2%
Selling and administrative as a % of revenue 32.8% 33.5%
Operating income as a % of revenue 2.7% 2.8%
</TABLE>
Certain prior year amounts have been reclassifed to conform with current year
presentation. Year ended September 30, 1999 net sales and cost of goods sold
have each been decreased by $86,542 from amounts previously reported. There
was no impact on operating income, net income or earnings per share as a
result of the reclassifications.
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
EXCLUDING SPECIAL ITEMS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended September 30,
-----------------------------------------
2000 * 1999 ** % Change
----------------- ------------------ --------------------
Revenues
Net sales $ 2,794,882 $ 2,778,256 0.6 %
Service and rentals 2,306,783 2,360,274 (2.3)
Finance income 345,280 282,739 22.1
--------------------------------------------------------------------------------------------------
5,446,945 5,421,269 0.5
--------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,864,318 1,861,024 0.2
Service and rental costs 1,393,093 1,373,097 1.5
Finance interest expense 167,700 126,676 32.4
Selling and administrative 1,785,751 1,823,083 (2.0)
--------------------------------------------------------------------------------------------------
5,210,862 5,183,880 0.5
--------------------------------------------------------------------------------------------------
Operating income 236,083 237,389 (0.6)
Interest expense 69,821 71,225 (2.0)
--------------------------------------------------------------------------------------------------
Income before taxes 166,262 166,164 0.1
Income taxes 73,155 74,198 (1.4)
--------------------------------------------------------------------------------------------------
Net income $ 93,107 $ 91,966 1.2
================= ==================
Basic Earnings Per Common Share $0.63 $0.62
================= ==================
Diluted Earnings Per Common Share $0.63 $0.62
================= ==================
Weighted Average Common Shares Outstanding, Basic 148,207 148,673
================= ==================
Weighted Average Common Shares Outstanding, Diluted 148,327 149,003
================= ==================
Operations Analysis:
Gross profit %, net sales 33.3% 33.0%
Gross profit %, service and rentals 39.6% 41.8%
Gross profit %, finance subsidiaries 51.4% 55.2%
Total gross profit % 37.1% 38.0%
Selling and administrative as a % of revenue 32.8% 33.6%
Operating income % of revenue 4.3% 4.4%
</TABLE>
* Fiscal 2000 excludes $3,739 gain on sale of investment, $3,049
extraordinary gain from the early retirement of debt ($1,707 after-tax),
$17,000 of shareholder litigation insurance proceeds and $105,168
restructuring and asset impairment charge and $2,526 benefit from
discontinued operations ($1,415 after-tax).
** Fiscal 1999 excludes $14,333 gain on asset securitization and $101,106 for
the shareholder litigation settlement.
Certain prior year amounts have been reclassifed to conform with current year
presentation. Year ended September 30, 1999 net sales and cost of goods sold
have each been decreased by $86,542 from amounts previously reported. There
was no impact on operating income, net income or earnings per share as a
result of the reclassifications.
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
