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 COMMENTS ON
revised FOURTH QUARTER expectationS
Revenue Growth Continues, but Slowed by Pricing Pressure
Cash Flow Remains Strong
Valley Forge, Pennsylvania - October 17, 2000 - IKON Office Solutions (NYSE:
IKN) today announced that, based on preliminary information, the Company expects
its earnings for the fourth quarter to be in the range of $.10-$.13 per share,
including a special gain of approximately $.01 per share. The Company had
previously expected its earnings for the fourth fiscal quarter to be similar to
its third quarter of $.19 per share. Revenue growth, previously anticipated to
be 4-6% for the fourth quarter, is expected to be approximately 2.5%.
James J. Forese, Chairman and Chief Executive Officer of IKON Office Solutions,
said: "We are in the midst of a rapidly changing competitive environment. We
have long recognized the shifts taking place in our market and have been
positioning IKON to compete in this changing environment over the long term.
Despite current marketplace pressures, we have continued to refine our solutions
model by enhancing our product and service portfolio with new, market-driven
offerings - including innovative equipment from leading vendors and value-added
e-services like Digital Express(R) 2000 and Virtual File Room(TM). Our aim is to
continue to gain market share and expand our digital customer base while at the
same time making the investments necessary to address new opportunities capable
of delivering long-term revenue and earnings growth. We have been, and will
continue to be, committed to these actions."
Commenting on the preliminary results, Forese stated: "Basically, our revised
expectations reflect three aspects of our business that are each in the midst of
change as IKON continues its transition toward expanded and integrated offerings
for the digital environment. Our core office equipment business continued to
gain market share this quarter with low double-digit revenue growth. However,
increased price pressures have softened revenue growth and gross margins from
our previously anticipated fourth quarter levels.
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"Second, service revenues related to our office equipment business declined at
greater levels than the normal decline associated with summer seasonality.
IKON's digital strategy has included a shift in focus toward higher-end
equipment - equipment capable of producing more service revenue streams at
stronger gross margins. At this stage in our transition, it appears from
preliminary data that gross margins in this area are indeed improving; however,
the increased volumes from our higher-end placements have taken longer than
expected to realize.
"Lastly, we continue to experience revenue declines and losses in our technology
service operations that provide networking and integration capabilities. As
previously announced, these resources are being merged into IKON North America
for fiscal 2001 to make their offerings more synergistic with our long-term
strategy, and we have no doubt experienced some additional disruption from those
activities.
"Our cash flow for the fourth quarter and for the fiscal year continues to be
strong. In fact, we expect that we will exceed our free cash flow target for the
year of $155 million, by approximately $30-50 million. In addition, our
debt-to-capital ratio - excluding our leasing business - is expected to be in
the 35-36% range, led by a reduction in corporate debt quarter to quarter of
more than $150 million.
"There is no question that this operating environment presents major ongoing
challenges as players strive to adopt a true solutions platform. Customers need
a solutions provider that is able to identify technological capabilities that
add the most value and a solutions provider that can, as well, integrate those
capabilities with their existing operations. We intend to be that solutions
provider."
Forese noted that over the last two years IKON has successfully transformed its
sales force and service organizations, as well as its marketing, training, and
recruiting programs to ensure that the Company can provide highly specialized
expertise on a nationwide basis. He observed that this provides IKON with a
prime competitive advantage, as customers strive for greater efficiencies
through the use of digital technologies.
The Company will provide additional details on its earnings and its long-term
outlook when it reports financial results for the fourth quarter and fiscal 2000
on October 26.
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, e-business development and technology training.
With fiscal 1999 revenues of $5.5 billion, IKON has approximately 900 locations
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worldwide including the United States, Canada, Mexico, the United Kingdom,
France, Germany, Ireland, and Denmark.
This news release includes information which may constitute forward-looking
statements within the meaning of the federal securities laws. These
forward-looking statements include statements relating to expected fourth
quarter results, including expected revenues, earnings, cash flow and
debt-to-capital ratio, and the expected benefits from IKON's new product
offering and its long-term strategy. 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.
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