<PAGE>
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) July 17, 1997
IKON CAPITAL, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE File No. 0-20405 23-2493042
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
1738 Bass Road, Macon, Georgia 31210
------------------------------ -----
Registrant's telephone number, including area code: (912) 471-2300
--------------
Not Applicable
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
------------
On July 17, 1997, the Registrant's parent, IKON Office Solutions,
Inc. ("IKON"), reported its earnings for the fiscal quarter ended
June 30, 1997.
This Report includes or incorporates by reference information
which may constitute forward-looking statements about the
Registrant or IKON made pursuant to the safe harbor provisions of
the federal securities laws. Although the Registrant believes the
expectations contained in such forward-looking statements are
reasonable, no assurances can be given that such expectations will
prove correct. Such forward-looking information is based on the
Registrant's or IKON's current plans or expectations, and is
subject to risks and uncertainties that could significantly affect
the Registrant's and/or IKON's current plans, anticipated actions
and future financial condition and results. These uncertainties
and risks include, but are not limited to, those relating to
IKON's successful management of an aggressive program to acquire
and integrate new companies, including companies with technical
services and products that are relatively new to IKON, and also
including companies outside the United States, which present
additional risks relating to international operations; risks and
uncertainties (applicable to both the Registrant and IKON)
relating to conducting operations in a competitive environment;
delays, difficulties, technological changes, management
transitions and employment issues (applicable to both the
Registrant and IKON) associated with a large-scale transformation
project; debt service requirements (applicable to both the
Registrant and IKON), 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 materially from those expressed in any
forward-looking statements made by or on behalf of the Registrant
or IKON.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(c) Exhibits.
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(99) Press Release dated July 17, 1997
<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 CAPITAL, INC.
By: /s/ Harry Kozee
--------------------------
Harry Kozee
Vice President-Finance
Dated: July 17, 1997
<PAGE>
Index to Exhibit
----------------
(99) Press Release Dated July 17, 1997
<PAGE>
EXHIBIT 99
----------
[LETTERHEAD OF IKON APPEARS HERE]
News Release
---------------------------------------------------------------------------
Contacts:
Michael N. Kilpatric Steven K. Eck Suzanne C. Shenk Susan G. Gaffney
News Media News Media Investor Relations Investor Relations
610-408-7294 610-408-7295 610-408-7290 610-408-7292
[email protected] [email protected] [email protected] [email protected]
IKON OFFICE SOLUTIONS ANNOUNCES
THIRD QUARTER EARNINGS
Achieves Revised Earnings Target Announced in Mid-June
Continues on Strong Growth Track
Valley Forge, Pennsylvania---July 17, 1997---IKON Office Solutions
(NYSE: IKN) today announced that earnings per share from continuing operations
in the third quarter, ended June 30, 1997, were $0.30, excluding transformation
costs. The results meet the revised earnings expectations announced in mid-June
when IKON said it was lowering third quarter expectations due to short-term
issues related to the acceleration of its business transformation process.
Earnings per share from continuing operations for the same quarter in 1996 were
$0.32, excluding transformation costs.
Revenues in the fiscal 1997 third quarter increased 24 percent to $1.3
billion, and income from continuing operations was $45.1 million, excluding
transformation costs, down from $47.3 million, excluding transformation costs,
in the same period last year. Including approximately $23 million in
transformation costs, net income for the third quarter in fiscal 1997 was $30.1
million and earnings per share were $0.19.
"IKON continues to demonstrate strong revenue growth, and our business
remains healthy," said John E. Stuart, IKON's chairman and chief executive
officer. "As we commented in June, we did underestimate the short-term impact
of accelerated transformation on our copier business and have moved to address
problems in that area.
- more -
<PAGE>
Outsourcing and technology services, our newer businesses, continue to perform
well. Our business strategy of providing total office technology solutions from
copiers and printers to computer networks and imaging services is on track and
being embraced by our customers."
The third quarter results reflect both lower sales productivity in certain
copier marketplaces due to an emphasis on transformation activities and
increased SG&A (selling, general and administrative) expenses resulting from
parallel operations which the company expects to eliminate as the transformation
process proceeds. The internal revenue growth rate in North America for the
quarter was 12 percent, while the overall internal revenue growth rate was 10
percent, reflecting the impact of operations in the United Kingdom.
IKON acquired 17 companies during the third quarter for a total of 64
acquisitions for the first nine months of fiscal 1997. The 64 acquisitions
represent approximately $450 million in revenues of the acquired companies for
the year preceding their purchase and include 23 systems integration companies,
20 outsourcing and imaging companies, and 21 office equipment companies. As
part of its strategy to grow by meeting the total office solutions needs of its
customers, IKON continues to aggressively acquire systems integration and
outsourcing/imaging capabilities in addition to expanding its traditional office
equipment base.
Also during the quarter, IKON repurchased 4.4 million shares of its common
stock under the stock repurchase program initiated by the company in April 1997.
Nine Month Results
- ------------------
For the first nine months of the fiscal year, revenues totaled $3.7
billion, 26 percent higher than the same period last year. Excluding
transformation costs and a one-time, first quarter charge for the extinguishment
of debt, income from continuing operations in the first nine months of fiscal
1997 was $153 million, a 19 percent increase over last year's first nine months.
Earnings per share, on the same basis, rose 17 percent to $1.03 from $0.88 in
the first nine months of last year. Including transformation costs and the one-
time charge, net income for the nine month period in fiscal 1997 was $97.4
million and earnings per share for the same period were $0.62.
- more -
<PAGE>
Transformation Program Designed to Improve Margins
- --------------------------------------------------
IKON's transformation program includes a variety of activities designed to
lower administrative costs and improve margins. These activities include
consolidating purchasing, inventory control, logistics, and other activities
into 13 customer service centers in the U.S., establishing a single financial
processing center, building a common information technology system, adopting a
common name, and creating sales and service marketplaces.
"The focus of our transformation, which will be substantially completed by
October 1998, is to change our infrastructure and processes so that we can take
full advantage of the high-growth, service-oriented markets in which we
compete," said Stuart. "By accelerating the transformation and offering a total
solutions strategy, we are confident the result will be significant growth and
increased shareholder value."
IKON Office Solutions (http://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 1996 revenues of more than $4 billion, IKON Office Solutions has
more than 900 locations in the U.S., Canada, Mexico, the United Kingdom, France,
Germany and Denmark.
This news release includes information which 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 risks and uncertainties such as
those relating to managing an aggressive program to acquire and integrate new
companies; conducting activities in a competitive environment; delays,
difficulties, management transitions and employment issues associated with
IKON's transformation; and general economic conditions. Therefore, actual
results may differ materially from the forward-looking statements.
# # #
<PAGE>
IKON Office Solutions, Inc.
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended June 30
----------------------------------------------
1997 1996 % Change
------------- ------------- ------------
<S> <C> <C> <C>
Revenues
Net sales $ 751,481 $ 615,245 22.1 %
Service and rentals 505,375 403,794 25.2
Finance income 59,450 40,086 48.3
- -----------------------------------------------------------------------------------------
1,316,306 1,059,125 24.3
- -----------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 475,897 387,266 22.9
Service and rental costs 251,838 194,553 29.4
Finance interest expense 26,350 17,334 52.0
Selling and administrative 474,541 372,148 27.5
Transformation costs 22,961 5,628
- -----------------------------------------------------------------------------------------
1,251,587 976,929 28.1
- -----------------------------------------------------------------------------------------
Operating income 64,719 82,196 (21.3)
Interest expense 12,089 9,435
- -----------------------------------------------------------------------------------------
Income from continuing operations before taxes 52,630 72,761 (27.7)
Taxes on income 22,502 29,105 (22.7)
- -----------------------------------------------------------------------------------------
Income from continuing operations 30,128 43,656 (31.0)
Discontinued operations (20,143)
- -----------------------------------------------------------------------------------------
Net income 30,128 23,513
- -----------------------------------------------------------------------------------------
Less preferred dividends 4,885 4,885
- -----------------------------------------------------------------------------------------
Available to common shareholders $ 25,243 $ 18,628
============= =============
Earnings Per Share
Continuing operations $0.19 $0.30 (36.7)%
Discontinued operations ($0.16)
- -----------------------------------------------------------------------------------------
$0.19 $0.14
============= =============
Average Shares Outstanding 133,552 130,955 2.0 %
============= =============
Continuing Operations Analysis:
Gross profit %, net sales 36.7% 37.1%
Gross profit %, service and rentals 50.2% 51.8%
Gross profit %, finance subsidiaries 55.7% 56.8%
Total gross profit % 42.7% 43.4%
SG&A as a % of revenue 36.0% 35.1%
Operating income % of revenue 4.9% 7.8%
Oper inc % of rev, excl trans costs 6.7% 8.3%
</TABLE>
<PAGE>
IKON Office Solutions, Inc.
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended June 30
--------------------------------------------
1997 1996 % Change
------------ ------------ --------
<S> <C> <C> <C>
Revenues
Net sales $ 2,134,861 $ 1,715,263 24.5 %
Service and rentals 1,439,528 1,152,285 24.9
Finance income 160,211 107,517 49.0
- --------------------------------------------------------------------------------------
3,734,600 2,975,065 25.5
- --------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,350,623 1,114,398 21.2
Service and rental costs 707,288 552,290 28.1
Finance interest expense 69,731 48,073 45.1
Selling and administrative 1,320,619 1,022,093 29.2
Transformation costs 98,494 11,931
- --------------------------------------------------------------------------------------
3,546,755 2,748,785 29.0
- --------------------------------------------------------------------------------------
Operating income 187,845 226,280 (17.0)
Interest expense 31,895 25,942
- --------------------------------------------------------------------------------------
Income from continuing operations before taxes
and extraordinary loss 155,950 200,338 (22.2)
Taxes on income 66,548 79,259 (16.0)
- --------------------------------------------------------------------------------------
Income from continuing operations before
extraordinary loss 89,402 121,079 (26.2)
Discontinued operations 20,151 34,717
- --------------------------------------------------------------------------------------
Income before extraordinary loss 109,553 155,796
Extraordinary loss from early extinguishment
of debt, net of tax benefit (12,156)
- --------------------------------------------------------------------------------------
Net income 97,397 155,796
- --------------------------------------------------------------------------------------
Less preferred dividends 14,655 17,434
- --------------------------------------------------------------------------------------
Available to common shareholders $ 82,742 $ 138,362
============ ============
Earnings (Loss) Per Share
Continuing operations $0.56 $0.82 (31.7)%
Discontinued operations $0.15 $0.28
Extraordinary loss ($0.09)
- --------------------------------------------------------------------------------------
$0.62 $1.10
============ ============
Average Shares Outstanding 134,669 126,204 6.7 %
============ ============
Continuing Operations Analysis:
Gross profit %, net sales 36.7% 35.0%
Gross profit %, service and rentals 50.9% 52.1%
Gross profit %, finance subsidiaries 56.5% 55.3%
Total gross profit % 43.0% 42.4%
SG&A as a % of revenue 35.3% 34.4%
Operating income % of revenue 5.0% 7.6%
Oper inc % of rev, excl trans costs 7.7% 8.0%
</TABLE>
<PAGE>
July 17, 1997
Attached are supplemental financial summaries of IKON Office Solutions for the
third quarter of 1997 and the nine months year-to-date, excluding the effect of
transformation costs on operating income.
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
<PAGE>
This schedule presents the financial results of IKON Office Solutions, Inc.
excluding the transformation costs amounting to ($.11) per share in the third
quarter of fiscal 1997 and ($.02) in the third quarter of fiscal 1996.
IKON Office Solutions, Inc.
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended June 30
----------------------------------------------
1997 1996 % Change
-------------- -------------- --------------
<S> <C> <C> <C>
Revenues
Net sales $ 751,481 $ 615,245 22.1 %
Service and rentals 505,375 403,794 25.2
Finance income 59,450 40,086 48.3
- ----------------------------------------------------------------------------------------
1,316,306 1,059,125 24.3
- ----------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 475,897 387,266 22.9
Service and rental costs 251,838 194,553 29.4
Finance interest expense 26,350 17,334 52.0
Selling and administrative 474,541 372,148 27.5
- ----------------------------------------------------------------------------------------
1,228,626 971,301 26.5
- ----------------------------------------------------------------------------------------
Operating income 87,680 87,824 (0.2)
Interest expense 12,089 9,435
- ----------------------------------------------------------------------------------------
Income from continuing operations before taxes 75,591 78,389 (3.6)
Taxes on income 30,538 31,075 (1.7)
- ----------------------------------------------------------------------------------------
Income from continuing operations 45,053 47,314 (4.8)
Discontinued operations (20,143)
- ----------------------------------------------------------------------------------------
Net income 45,053 27,171
- ----------------------------------------------------------------------------------------
Less preferred dividends 4,885 4,885
- ----------------------------------------------------------------------------------------
Available to common shareholders $ 40,168 $ 22,286
============ ==============
Earnings Per Share
Continuing operations $0.30 $0.32 (6.3)%
Discontinued operations ($0.15)
- ----------------------------------------------------------------------------------------
$0.30 $0.17
============ ==============
Average Shares Outstanding 133,552 130,955 2.0 %
============ ==============
Continuing Operations Analysis:
Gross profit %, net sales 36.7% 37.1%
Gross profit %, service and rentals 50.2% 51.8%
Gross profit %, finance subsidiaries 55.7% 56.8%
Total gross profit % 42.7% 43.4%
SG&A as a % of revenue 36.0% 35.1%
Operating income % of revenue 6.7% 8.3%
</TABLE>
This information is provided for additional analysis and is not intended to be
a presentation in accordance with generally accepted accounting principles.
<PAGE>
This schedule presents the financial results of IKON Office Solutions, Inc.
excluding the transformation costs amounting to ($.47) per share in the first
nine months of fiscal 1997 and ($.06) in the first nine months of fiscal 1996.
IKON Office Solutions, Inc.
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended June 30
------------------------------------------
1997 1996 % Change
------------ ----------- -----------
<S> <C> <C> <C>
Revenues
Net sales $ 2,134,861 $ 1,715,263 24.5 %
Service and rentals 1,439,528 1,152,285 24.9
Finance income 160,211 107,517 49.0
- ----------------------------------------------------------------------------------------
3,734,600 2,975,065 25.5
- ----------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,350,623 1,114,398 21.2
Service and rental costs 707,288 552,290 28.1
Finance interest expense 69,731 48,073 45.1
Selling and administrative 1,320,619 1,022,093 29.2
- ----------------------------------------------------------------------------------------
3,448,261 2,736,854 26.0
- ----------------------------------------------------------------------------------------
Operating income 286,339 238,211 20.2
Interest expense 31,895 25,942
- ----------------------------------------------------------------------------------------
Income from continuing operations before taxes
and extraordinary loss 254,444 212,269 19.9
Taxes on income 101,021 83,435 21.1
- ----------------------------------------------------------------------------------------
Income from continuing operations before
extraordinary loss 153,423 128,834 19.1
Discontinued operations 20,151 34,717
- ----------------------------------------------------------------------------------------
Income before extraordinary loss 173,574 163,551
Extraordinary loss from early extinguishment
of debt, net of tax benefit (12,156)
- ----------------------------------------------------------------------------------------
Net income 161,418 163,551
- ----------------------------------------------------------------------------------------
Less preferred dividends 14,655 17,434
- ----------------------------------------------------------------------------------------
Available to common shareholders $ 146,763 $ 146,117
============ ============
Earnings (Loss) Per Share
Continuing operations $1.03 $0.88 17.0 %
Discontinued operations $0.15 $0.28
Extraordinary loss ($0.09)
- ----------------------------------------------------------------------------------------
$1.09 $1.16
============ ============
Average Shares Outstanding 134,669 126,204 6.7 %
============ ============
Continuing Operations Analysis:
Gross profit %, net sales 36.7% 35.0%
Gross profit %, service and rentals 50.9% 52.1%
Gross profit %, finance subsidiaries 56.5% 55.3%
Total gross profit % 43.0% 42.4%
SG&A as a % of revenue 35.3% 34.4%
Operating income % of revenue 7.7% 8.0%
</TABLE>
This information is provided for additional analysis and is not intended to be
a presentation in accordance with generally accepted accounting principles.
