<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) April 14, 1997
IKON CAPITAL, INC.
(Exact name of registrant as specified in its charter)
------------------------------------
DELAWARE File No. 0-20405 23-2493042
- -------------------------- ----------------------- -------------------
(State of other jurisdiction (Commission File (IRS Employer
of incorporation Number) Identification
Number)
1738 Bass Road, Macon, Georgia 31210
------------------------------- -----
(Address of principal executive offices) (Zip Code)
(912) 471-2300
Registrant's telephone number, including area code
Not Applicable
-------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
------------
On April 14, 1997, the Registrant's parent, IKON Office Solutions, Inc.
("IKON") reported its earnings for the fiscal quarter ended March 31, 1997 and
announced certain management changes.
On April 17, 1997, IKON announced that the company may repurchase from
time to time as much as 5 percent of the outstanding shares of IKON in open
market transactions. Chairman and Chief Executive Officer John E. Stuart stated
that IKON believes that its shares are currently undervalued in the market. Any
repurchased shares would be used primarily in connection with IKON's acquisition
program.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
-------------------------------------------------------------------
(c) Exhibits
--------
(99) IKON Press Release dated April 14, 1997
(99a) IKON Press Release dated April 17, 1997
FORWARD-LOOKING INFORMATION
This Report contains, and other materials filed or to be filed by the
Registrant with the Commission which are incorporated by reference herein, as
well as information included in oral statements or other written statements made
or to be made by the Registrant, contain or will contain or include, disclosures
which are forward-looking statements relating to the Registrant or its parent,
IKON Office Solutions, Inc. ("IKON") within the meaning of Section 27A of the
Securities Act of 1934, as amended (the "Act"), and Section 21E of the Exchange
Act. Such forward-looking statements address, among other things, strategic
initiatives (including plans for enhancing the Registrant's or IKON's business
through new acquisitions, information technology systems, sales strategies,
market growth plans and acquisition and margin enhancement initiatives, capital
expenditure requirements and financing sources). Such forward-looking
information is based upon management's current plans or expectations and is
subject to a number of uncertainties and risks 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 and employment issues
(applicable to both the Registrant and IKON) associated in 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 from those
expressed in any forward-looking statements made by or on behalf of the
Registrant or IKON.
<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/ O. Gordon Brewer, Jr.
-------------------------
O. Gordon Brewer, Jr.
Treasurer
Dated: April 17, 1997
<PAGE>
Index to Exhibit
----------------
(99) Press Release dated April 14, 1997
(99a) Press Release dated April 17, 1997
<PAGE>
Exhibit 99
News Release
<TABLE>
<CAPTION>
Contacts:
<S> <C> <C>
Michael N. Kilpatric Suzanne C. Shenk Susan G. Gaffney
Vice President, Communications Manager, Investor Relations Manager, Investor Relations
610-993-3662 610-993-3526 610-993-3694
</TABLE>
IKON OFFICE SOLUTIONS' SECOND QUARTER INCOME
UP 25 PERCENT EXCLUDING TRANSFORMATION COSTS
Valley Forge, Pennsylvania--April 14, 1997--IKON Office Solutions (NYSE:
IKN) today announced income from continuing operations in the second quarter,
ended March 31, 1997, increased 25 percent, excluding transformation costs, to
$55 million from $44 million for the same period in fiscal 1996. Earnings per
share from continuing operations were up 19 percent, excluding the
transformation costs, to $0.37 from $0.31 in the previous fiscal year's second
quarter. Revenues for fiscal 1997's second quarter grew 26 percent to $1.3
billion. Including transformation costs, net income for the second quarter in
fiscal 1997 was $15 million and earnings per share were $0.07.
"Our quarterly results reflect the continuing strength of this business,
especially in North America where internal revenue growth for the quarter was 14
percent, despite a temporary shortage in high-end copiers and printers from our
suppliers," said John E. Stuart, IKON chairman and chief executive officer.
"Second quarter operating margins, excluding transformation costs, were 8.1
percent for the quarter and 8.2 percent for the first half of the 1997 fiscal
year."
Second quarter revenues from the United Kingdom declined significantly from
the previous year's second quarter, negatively impacting internal growth by 2.5
percentage points. Total internal revenue growth for the second quarter was 11.5
percent.
UK operations are continuing to recover from an abrupt and untested
consolidation in the first quarter. Since then, management changes were made,
the organization is being rebuilt, and IKON expects the UK to return to previous
run rates within the next 12 months.
-more-
<PAGE>
-2-
IKON also acquired 24 companies during the second quarter for a total of 47
acquisitions in the first six months of the fiscal year. Of the acquisitions in
the second quarter, nine were systems integration companies, six were
outsourcing companies providing document services and management services, and
nine were traditional office equipment dealers. This year, IKON, as part of its
total solutions strategy, has emphasized the acquisition of systems integration
and outsourcing companies to build its capabilities in these areas.
For the first six months of the fiscal year, revenues totaled $2.4
billion, 26 percent higher than the first half of last year. Excluding
transformation costs and one-time, first quarter charge for the extinguishment
of debt, net income from continuing operations in the first half of the fiscal
year, was $108 million, a 33 percent increase over last year's first six months,
and earnings per share, on the same basis, rose 30 percent to $.73 from $.56 in
the first half of last year. Including transformation costs and the one-time
charge, net income for the first six months of fiscal 1997 was $67 million and
earnings per share for the same period were $0.43.
Stuart said that second quarter transformation costs were $61 million, of
which approximately $25 million relates to the SAP computer platform expenses
including the write-off of capitalized costs. Transformation costs also included
employee-relates expenses, re-branding activities, and facilities consolidation
costs.
In order to more effectively drive the accelerated transformation
activities, the company also announced changes in management responsibilities.
Stuart, as IKON chairman and chief executive officer, will assume direct
responsibility for field operations, while Kurt Dinkelacker, IKON's president,
will manage the company's accelerated transformation activities. Dinkelacker
also becomes chief financial officer, a position he previously held. Robert M.
Kearns II, currently senior vice president and chief financial officer becomes
senior vice president, finance, responsible for managing the financial and
accounting changes affecting the newly created customer service centers.
-more-
<PAGE>
-3-
"These changes put the critical management strengths in place to accelerate
the transformation and more quickly realize its benefits," said Stuart. "Kurt's
direct involvement will ensure our ability to capture the transformation's
financial and operational opportunities."
IKON's transformation program, which began last year, has been accelerated
to be completed a year earlier in October 1998. In the program, IKON will
consolidate purchasing, inventory control, logistics, and other activities into
13 customer service centers in the U.S., establish a single financial processing
center, utilize a common information technology system, adopt a common name, and
create marketplace-focused field operations with greater attention to customer
sales and service.
Said Stuart, "Transforming to a streamlined and integrated total solutions
company, while maintaining strong performance, reflects IKON's commitment to
continue to deliver outstanding shareholder value in a rapidly changing
marketplace."
IKON Office Solutions is one of the world's leading office technology
companies providing customers with total office solutions from copier and
printing systems, computer networking and overflow duplicating services to copy
center management, technology training and electronic file conversion. With
fiscal 1996 revenues of $4 billion, IKON has operations in the U.S., Canada,
Mexico, the United Kingdom, France, Germany and Denmark.
###
<PAGE>
IKON Office Solutions, Inc.
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------------------
1997 1996 % Change
----------- ------------ ------------
<S> <C> <C> <C>
Revenues
Net sales $ 744,552 $ 585,006 27.3 %
Service and rentals 480,293 394,719 21.7
Finance income 53,015 35,636 48.8
- -------------------------------------------------------------------------------------
1,277,860 1,015,361 25.9
- -------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 469,792 393,906 19.3
Service and rental costs 239,343 188,402 27.0
Finance interest expense 23,370 15,930 46.7
Selling and administrative 442,451 336,101 31.6
Transformation costs 61,190 5,613
- -------------------------------------------------------------------------------------
1,236,146 939,952 31.5
- -------------------------------------------------------------------------------------
Operating income 41,714 75,409 (44.7)
Interest expense 11,605 9,167
- -------------------------------------------------------------------------------------
Income from continuing operations before taxes 30,109 66,242 (54.5)
Taxes on income 15,494 25,756 (39.8)
- -------------------------------------------------------------------------------------
Income from continuing operations 14,615 40,486 (63.9)
Discontinued operations 28,631
- -------------------------------------------------------------------------------------
Net income 14,615 69,117
- -------------------------------------------------------------------------------------
Less preferred dividends 4,885 4,885
- -------------------------------------------------------------------------------------
Available to common shareholders $ 9,730 $ 64,232
=========== ============
Earnings Per Share
Continuing operations $0.07 $0.28 (75.0)%
Discontinued operations $0.22
- -------------------------------------------------------------------------------------
$0.07 $0.50
=========== ============
Average Shares Outstanding 136,258 128,451 6.1 %
=========== ============
Continuing Operations Analysis:
Gross profit %, net sales 36.9% 32.7%
Gross profit %, service and rentals 50.2% 52.3%
Gross profit %, finance subsidiaries 55.9% 55.3%
Total gross profit % 42.7% 41.1%
SG&A as a % of revenue 34.6% 33.1%
Operating income % of revenue 3.3% 7.4%
Oper inc % of rev, excl trans costs 8.1% 8.0%
</TABLE>
<PAGE>
IKON Office Solutions, Inc.
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Six Months Ended March 31
-----------------------------------------------------
1997 1996 % Change
--------------- --------------- ---------------
<S> <C> <C> <C>
Revenues
Net sales $ 1,383,380 $ 1,100,018 25.8 %
Service and rentals 934,153 748,491 24.8
Finance income 100,761 67,431 49.4
- -----------------------------------------------------------------------------------------------
2,418,294 1,915,940 26.2
- -----------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 874,726 727,132 20.3
Service and rental costs 455,450 357,737 27.3
Finance interest expense 43,381 30,739 41.1
Selling and administrative 846,078 649,945 30.2
Transformation costs 75,533 6,303
- -----------------------------------------------------------------------------------------------
2,295,168 1,771,856 29.5
- -----------------------------------------------------------------------------------------------
Operating income 123,126 144,084 (14.5)
Interest expense 19,806 16,507
- -----------------------------------------------------------------------------------------------
Income from continuing operations before taxes
and extraordinary loss 103,320 127,577 (19.0)
Taxes on income 44,046 50,154 (12.2)
- -----------------------------------------------------------------------------------------------
Income from continuing operations before
extraordinary loss 59,274 77,423 (23.4)
Discontinued operations 20,151 54,860
- -----------------------------------------------------------------------------------------------
Income before extraordinary loss 79,425 132,283
Extraordinary loss from early extinguishment
of debt, net of tax benefit (12,156)
- -----------------------------------------------------------------------------------------------
Net income 67,269 132,283
- -----------------------------------------------------------------------------------------------
Less preferred dividends 9,770 12,549
- -----------------------------------------------------------------------------------------------
Available to common shareholders $ 57,499 $ 119,734
=============== ===============
Earnings (Loss) Per Share
Continuing operations $0.37 $0.53 (30.2)%
Discontinued operations $0.15 $0.44
Extraordinary loss ($0.09)
- -----------------------------------------------------------------------------------------------
$0.43 $0.97
=============== ===============
Average Shares Outstanding 135,226 123,838 9.2 %
=============== ===============
Continuing Operations Analysis:
Gross profit %, net sales 36.8% 33.9%
Gross profit %, service and rentals 51.2% 52.2%
Gross profit %, finance subsidiaries 56.9% 54.4%
Total gross profit % 43.2% 41.8%
SG&A as a % of revenue 35.0% 33.9%
Operating income % of revenue 5.1% 7.5%
Oper inc % of rev, excl trans costs 8.2% 7.8%
</TABLE>
<PAGE>
April 14, 1997
Attached are supplemental financial summaries of IKON Office Solutions for the
second quarter of 1997 and the six months year-to-date, excluding the effect of
transformation costs on operating income.
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
<PAGE>
This schedule presents the financial results of IKON Office Solutions, Inc.
excluding the transformation costs amounting to ($.36) per share in the second
quarter of fiscal 1997 and ($.03) in the second quarter of fiscal 1996.
IKON Office Solutions, Inc.
- ---------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended March 31
------------------------------------------
1997 1996 % Change
------------ ------------ ----------
<S> <C> <C> <C>
Revenues
Net sales $ 744,552 $ 585,006 27.3 %
Service and rentals 480,293 394,719 21.7
Finance income 53,015 35,636 48.8
- ------------------------------------------------------------------------------------------
1,277,860 1,015,361 25.9
- ------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 469,792 393,906 19.3
Service and rental costs 239,343 188,402 27.0
Finance interest expense 23,370 15,930 46.7
Selling and administrative 442,451 336,101 31.6
- ------------------------------------------------------------------------------------------
1,174,956 934,339 25.8
- ------------------------------------------------------------------------------------------
Operating income 102,904 81,022 27.0
Interest expense 11,605 9,167
- ------------------------------------------------------------------------------------------
Income from continuing operations before taxes 91,299 71,855 27.1
Taxes on income 36,337 27,721 31.1
- ------------------------------------------------------------------------------------------
Income from continuing operations 54,962 44,134 24.5
Discontinued operations 28,631
- ------------------------------------------------------------------------------------------
Net income 54,962 72,765
- ------------------------------------------------------------------------------------------
Less preferred dividends 4,885 4,885
- ------------------------------------------------------------------------------------------
Available to common shareholders $ 50,077 $ 67,880
============ ============
Earnings Per Share
Continuing operations $0.37 $0.31 19.4 %
Discontinued operations $0.22
- ------------------------------------------------------------------------------------------
$0.37 $0.53
============ ============
Average Shares Outstanding 136,258 128,451 6.1 %
============ ============
Continuing Operations Analysis:
Gross profit %, net sales 36.9% 32.7%
Gross profit %, service and rentals 50.2% 52.3%
Gross profit %, finance subsidiaries 55.9% 55.3%
Total gross profit % 42.7% 41.1%
SG&A as a % of revenue 34.6% 33.1%
Operating income % of revenue 8.1% 8.0%
</TABLE>
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
<PAGE>
This schedule presents the financial results of IKON Office Solutions, Inc.
excluding the transformation costs amounting to ($.36) per share in the first
half of fiscal 1997 and ($.03) in the first half of fiscal 1996.
IKON Office Solutions, Inc.
- --------------------------
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Six Months Ended March 31
-----------------------------------------
1997 1996 % Change
------------- ------------- -------------
<S> <C> <C> <C>
Revenues
Net sales $ 1,383,380 $ 1,100,018 25.8 %
Service and rentals 934,153 748,491 24.8
Finance income 100,761 67,431 49.4
- ---------------------------------------------------------------------------------------
2,418,294 1,915,940 26.2
- ---------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 874,726 727,132 20.3
Service and rental costs 455,450 357,737 27.3
Finance interest expense 43,381 30,739 41.1
Selling and administrative 846,078 649,945 30.2
- ---------------------------------------------------------------------------------------
2,219,635 1,765,553 25.7
- ---------------------------------------------------------------------------------------
Operating income 198,659 150,387 32.1
Interest expense 19,806 16,507
- ---------------------------------------------------------------------------------------
Income from continuing operations before taxes
and extraordinary loss 178,853 133,880 33.6
Taxes on income 70,483 52,360 34.6
- ---------------------------------------------------------------------------------------
Income from continuing operations before
extraordinary loss 108,370 81,520 32.9
Discontinued operations 20,151 54,860
- ---------------------------------------------------------------------------------------
Income before extraordinary loss 128,521 136,380
Extraordinary loss from early extinguishment
of debt, net of tax benefit (12,156)
- ---------------------------------------------------------------------------------------
Net income 116,365 136,380
- ---------------------------------------------------------------------------------------
Less preferred dividends 9,770 12,549
- ---------------------------------------------------------------------------------------
Available to common shareholders $ 106,595 $ 123,831
=========== ===========
Earnings (Loss) Per Share
Continuing operations $0.73 $0.56 30.4 %
Discontinued operations $0.15 $0.44
Extraordinary loss ($0.09)
- ---------------------------------------------------------------------------------------
$ 0.79 $ 1.00
=========== ===========
Average Shares Outstanding 135,226 123,838 9.2 %
=========== ===========
Continuing Operations Analysis:
Gross profit %, net sales 36.8% 33.9%
Gross profit %, service and rentals 51.2% 52.2%
Gross profit %, finance subsidiaries 56.9% 54.4%
Total gross profit % 43.2% 41.8%
SG&A as a % of revenue 35.0% 33.9%
Operating income % of revenue 8.2% 7.8%
</TABLE>
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
<PAGE>
Contacts:
<TABLE>
<S> <C> <C>
Michael N. Kilpatric Suzanne C. Shenk Susan G. Gaffney
Vice President, Communications Manager, Investor Relations Manager, Investor Relations
610-993-3662 610-993-3526 610-993-3694
</TABLE>
IKON OFFICE SOLUTIONS ANNOUNCES
STOCK REPURCHASE PLANS
Valley Forge, Pennsylvania -- April 17, 1997 -- IKON Office Solutions
(NYSE:IKN) today announced that the company may repurchase from time to time as
much as 5 percent of the outstanding shares of IKON common stock in open market
transactions.
"We believe our shares are currently undervalued in the market, and the
price is attractive," said Chairman and Chief Executive Officer John E. Stuart.
"We plan to use any repurchased shares primarily in connection with our
acquisition program, and we will proceed with our aggressive acquisition
strategy to expand service capabilities for our customers and broaden our market
coverage."
IKON Office Solutions 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 $4 billion, IKON has operations in the U.S., Canada,
Mexico, the United Kingdom, France, Germany and Denmark.
