Exhibit 99
Contacts:
Veronica L. Rosa Steven K. Eck
Investor Relations Media Relations
610-408-7196 610-408-7295
[email protected] [email protected]
IKON OFFICE SOLUTIONS ANNOUNCES
THIRD QUARTER RESULTS
Cites Double-Digit Growth in Office Equipment Sales
Continues Expansion of Product and Services Portfolio
Valley Forge, Pennsylvania - July 26, 2000 - IKON Office Solutions (NYSE: IKN)
today reported results for the third quarter of fiscal 2000. For the quarter
ended June 30, 2000, IKON reported net income of $31.6 million, or $.21 per
common share, including onetime gains from early extinguishment of debt and the
sale of investments totaling $.02 per common share. This compares to net income
of $27.3 million, or $.18 per common share, for the same period in 1999.
Revenues for the quarter were $1.42 billion, a 2% increase from the prior year.
Without the negative effect of foreign currency translation, revenue growth
would have been 3%.
"The quarter was characterized by double-digit growth in office equipment sales
and continued investment in our growth initiatives designed to deliver a broader
range of differentiated products and services to our customers," said James J.
Forese, Chairman and Chief Executive Officer of IKON Office Solutions. "Amid
tough competition industry-wide, we continued to produce strong growth in sales
of office equipment, especially digital, color and high-end technology,
registering 15% growth compared to a year ago. Digital revenues were 85% of
total equipment revenues, evidence that IKON has a strong sales organization
with a tremendous potential to seize the growing opportunities in the digital
marketplace. We believe our growth in this marketplace will continue to benefit
from the investments we have made in realigning our sales force for more
consultative and integrated solution selling. Adding further to our growth
potential, we continue to invest in new products and services, thus adding to
our array of state-of-the-art solutions that help customers communicate business
information more effectively."
In terms of IKON's total revenue, the Company's strong growth in equipment sales
was partially offset by declines in technology services and outsourcing revenue
compared to a year ago. "This largely reflects the closing of certain
non-strategic locations as part of our restructuring program," Forese stated.
"Also, the demand for technology services was unusually high in the third
quarter of last year."
Ongoing Actions to Diversify Revenue Base
Forese noted that IKON has been responding to industry-wide changes in
distribution models and customer applications by taking a number of decisive
steps to diversify its revenue base. "We are broadening the range of solutions
we offer and
<PAGE>
entering new markets that offer significant opportunity," he stated. "For
example, we are moving aggressively to become a leading e-services provider with
offerings like IKON's Digital Express(R) 2000, which allows customers to access
our nationwide network of digital print production centers via the Internet, and
Virtual File Room(TM), IKON's Web-based document repository designed to support
a collaborative, distributed work process for complex litigation. We are also
extending our reach in the high-opportunity markets that we have targeted by
expanding our range of strategic alliances, joining forces with leading
solutions providers whose capabilities align with ours.
"In addition, we are developing comprehensive e-business solutions to enhance
our competitive position and make it easier for our customers to do business
with us. This includes a pilot program currently underway for major-account
customers, allowing the purchase of contracted equipment and supplies, and
access to customer service via the Web," Forese stated.
Forese said that IKON will continue to leverage its broad base of capabilities
and expertise to stay ahead in a rapidly evolving marketplace, and will continue
to invest in the latest technologies and support that customers require,
building customized solutions that differentiate IKON in the market.
For example, during the current fiscal year, IKON has:
o Expanded sales coverage by an additional 475 sales representatives since
the beginning of the fiscal year against a full year goal of 400-500, with
a focus on key growth areas;
o Expanded its high-end, digital product offerings for the production market
by introducing state-of-the-art imaging systems, including the Canon
imageRUNNER 110 and the Ricoh Aficio 850, using the T/R Systems MicroPress
for cluster printing;
o Aligned its outsourcing operations to leverage organizational synergies and
to expand its share of the customer's business, through on-site facilities
management, outsourced commercial printing and increased attention to the
legal market, including corporate legal departments;
o Introduced Digital Express 2000, IKON's solution for e-procurement in the
production print market, and formed alliances with print e-procurement
providers like Fatbrain.com and iPrint.com, leveraging their front-end,
order-taking capabilities to expand the revenue base of IKON's network of
digital print production centers;
o Introduced Virtual File Room, an internally developed, secure Web-based
document repository;
o Partnered with leading vendors to enhance its digital technology offerings
- including Splash Technology for office color, Adobe for hardcopy/softcopy
convergence, and Solimar and RSA for handling data center print streams;
and
o Announced the merger of its network integration resources into its core
business to optimize IKON's ability to deliver fully integrated business
communications solutions.
<PAGE>
In addition, during the third quarter, the Company completed the repurchase of
the remaining 2.2 million shares under its 1997 share repurchase authorization.
The Company is currently executing the stock repurchase program authorized by
the Board of Directors on June 23, 2000, which allowed for up to $75 million of
the Company's common stock to be repurchased.
Fourth Quarter Outlook
"We believe we are making the right investments to expand our existing business
and capture opportunities in new markets, such as print-on-demand services,
production printing and e-procurement of printed documents - all markets with
double-digit growth rates. We will continue to make these investments. However,
going into the fourth quarter, we anticipate increased industry competition.
Given intensifying competitive pressure and the impact of repositioning IKON's
technology services, our fourth quarter earnings should remain flat on a
sequential basis, but with substantial improvement year over year," stated
Forese. "We anticipate revenue growth in the fourth quarter should be in the 4%
- 6% range year over year, fueled by continued growth in equipment sales.
"I think it is clear that our industry is in a period of transition," Forese
stated. "No player in this industry can stand still and stay wedded to old ways
of doing business. Each player has to leverage its existing strengths to
generate new opportunities.
IKON is doing just that."
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
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, including, but not
limited to: statements concerning expected growth from the company's
investments; expected results of IKON's growth initiatives and IKON's fourth
quarter outlook. 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>
Third Quarter Fiscal
------------------------------------
2000 1999 % Change
--------------- ---------------- -----------------
Revenues
<S> <C> <C> <C>
Net sales $ 740,959 $ 719,047 3.0 %
Service and rentals 583,524 595,573 (2.0)
Finance income 92,922 70,847 31.2
---------------------------------------------------------------------------------------------
1,417,405 1,385,467 2.3
---------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 503,809 500,614 0.6
Service and rental costs 349,438 338,498 3.2
Finance interest expense 43,889 30,553 43.6
Selling and administrative 451,797 447,785 0.9
---------------------------------------------------------------------------------------------
1,348,933 1,317,450 2.4
---------------------------------------------------------------------------------------------
Operating income 68,472 68,017 0.7
Gain on sale of investment 3,288
Interest expense 18,314 17,031 7.5
---------------------------------------------------------------------------------------------
Income before income taxes 53,446 50,986 4.8
Income taxes 23,525 23,708 (0.8)
---------------------------------------------------------------------------------------------
Income before extraordinary gain 29,921 27,278 9.7
Extraordinary gain from early extinguishment of
debt, net of tax benefit 1,707
---------------------------------------------------------------------------------------------
Net income $ 31,628 $ 27,278 15.9
=============== ================
Basic Earnings Per Common Share $0.21 $0.18
=============== ================
Diluted Earnings Per Common Share $0.21 $0.18
=============== ================
Weighted Average Common Shares Outstanding, Basic 148,922 148,787
=============== ================
Weighted Average Common Shares Outstanding, Diluted 148,941 149,115
=============== ================
Operations Analysis:
Gross profit %, net sales 32.0% 30.4%
Gross profit %, service and rentals 40.1% 43.2%
Gross profit %, finance subsidiaries 52.8% 56.9%
Total gross profit % 36.7% 37.2%
Selling and administrative as a % of revenue 31.9% 32.3%
Operating income as a % of revenue 4.8% 4.9%
</TABLE>
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
EXCLUDING SPECIAL ITEMS
<TABLE>
<CAPTION>
Third Quarter Fiscal
------------------------------------
2000 * 1999 % Change
--------------- ---------------- -----------------
Revenues
<S> <C> <C> <C>
Net sales $ 740,959 $ 719,047 3.0 %
Service and rentals 583,524 595,573 (2.0)
Finance income 92,922 70,847 31.2
-----------------------------------------------------------------------------------------------
1,417,405 1,385,467 2.3
-----------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 503,809 500,614 0.6
Service and rental costs 349,438 338,498 3.2
Finance interest expense 43,889 30,553 43.6
Selling and administrative 451,797 447,785 0.9
-----------------------------------------------------------------------------------------------
1,348,933 1,317,450 2.4
-----------------------------------------------------------------------------------------------
Operating income 68,472 68,017 0.7
Interest expense 18,314 17,031 7.5
-----------------------------------------------------------------------------------------------
Income before income taxes 50,158 50,986 (1.6)
Income taxes 22,078 23,708 (6.9)
-----------------------------------------------------------------------------------------------
Net income $ 28,080 $ 27,278 2.9
=============== ================
Basic Earnings Per Common Share $0.19 $0.18
=============== ================
Diluted Earnings Per Common Share $0.19 $0.18
=============== ================
Weighted Average Common Shares Outstanding, Basic 148,922 148,787
=============== ================
Weighted Average Common Shares Outstanding, Diluted 148,941 149,115
=============== ================
Operations Analysis:
Gross profit %, net sales 32.0% 30.4%
Gross profit %, service and rentals 40.1% 43.2%
Gross profit %, finance subsidiaries 52.8% 56.9%
Total gross profit % 36.7% 37.2%
Selling and administrative as a % of revenue 31.9% 32.3%
Operating income as a % of revenue 4.8% 4.9%
</TABLE>
* Third quarter fiscal 2000 excludes $3,288 gain on sale of investment and
$3,049 extraordinary gain on early retirment of debt ($1,707 after-tax).
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>
Year To Date Fiscal
-------------------------------
2000 1999 % Change
------------- ------------- ---------------
Revenues
<S> <C> <C> <C>
Net sales $ 2,137,370 $ 2,146,828 (0.4)%
Service and rentals 1,737,774 1,782,494 (2.5)
Finance income 255,089 225,212 13.3
--------------------------------------------------------------------------------------------------
4,130,233 4,154,534 (0.6)
--------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,438,975 1,464,723 (1.8)
Service and rental costs 1,048,707 1,031,211 1.7
Finance interest expense 122,849 92,539 32.8
Selling and administrative 1,314,579 1,370,636 (4.1)
Restructuring and asset impairment charge 105,340
--------------------------------------------------------------------------------------------------
4,030,450 3,959,109 1.8
--------------------------------------------------------------------------------------------------
Operating income 99,783 195,425 (48.9)
Gain on sale of investment 3,288
Interest expense 51,934 55,573 (6.5)
--------------------------------------------------------------------------------------------------
Income before income taxes 51,137 139,852 (63.4)
Income taxes 41,999 61,031 (31.2)
--------------------------------------------------------------------------------------------------
Income before extraordinary gain 9,138 78,821 (88.4)
Extraordinary gain from early extinguishment of
debt, net of tax benefit 1,707
--------------------------------------------------------------------------------------------------
Net income $ 10,845 $ 78,821 (86.2)
============= =============
Basic Earnings Per Common Share $0.07 $0.53
============= =============
Diluted Earnings Per Common Share $0.07 $0.53
============= =============
Weighted Average Common Shares Outstanding, Basic 149,158 148,576
============= =============
Weighted Average Common Shares Outstanding, Diluted 149,317 148,961
============= =============
Operations Analysis:
Gross profit %, net sales 32.7% 31.8%
Gross profit %, service and rentals 39.7% 42.1%
Gross profit %, finance subsidiaries 51.8% 58.9%
Total gross profit % 36.8% 37.7%
Selling and administrative as a % of revenue 31.8% 33.0%
Operating income as a % of revenue 2.4% 4.7%
</TABLE>
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
EXCLUDING SPECIAL ITEMS
<TABLE>
<CAPTION>
Year To Date Fiscal
-----------------------------------
2000 * 1999 ** % Change
--------------- --------------- -----------------
Revenues
<S> <C> <C> <C>
Net sales $ 2,137,370 $ 2,146,828 (0.4)%
Service and rentals 1,737,774 1,782,494 (2.5)
Finance income 255,089 210,879 21.0
-----------------------------------------------------------------------------------------------
4,130,233 4,140,201 (0.2)
-----------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,438,975 1,464,723 (1.8)
Service and rental costs 1,048,707 1,031,211 1.7
Finance interest expense 122,849 92,539 32.8
Selling and administrative 1,331,579 1,370,636 (2.8)
-----------------------------------------------------------------------------------------------
3,942,110 3,959,109 (0.4)
-----------------------------------------------------------------------------------------------
Operating income 188,123 181,092 3.9
Interest expense 51,934 55,573 (6.5)
-----------------------------------------------------------------------------------------------
Income before income taxes 136,189 125,519 8.5
Income taxes 59,923 55,298 8.4
-----------------------------------------------------------------------------------------------
Net income $ 76,266 $ 70,221 8.6
=============== ===============
Basic Earnings Per Common Share $0.51 $0.47
=============== ===============
Diluted Earnings Per Common Share $0.51 $0.47
=============== ===============
Weighted Average Common Shares Outstanding, Basic 149,158 148,576
=============== ===============
Weighted Average Common Shares Outstanding, Diluted 149,317 148,961
=============== ===============
Operations Analysis:
Gross profit %, net sales 32.7% 31.8%
Gross profit %, service and rentals 39.7% 42.1%
Gross profit %, finance subsidiaries 51.8% 56.1%
Total gross profit % 36.8% 37.5%
Selling and administrative as a % of revenue 32.2% 33.1%
Operating income as a % of revenue 4.6% 4.4%
</TABLE>
* Fiscal 2000 excludes $3,288 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 $105,340
restructuring and asset impairment charge.
** Fiscal 1999 excludes $14,333 gain on asset securitization.
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
