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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) November 4, 1998
IOS CAPITAL, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE File No. 0-20405 23-2493042
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(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification
Number)
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1738 Bass Road, Macon, Georgia 31210
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(Address of principal executive offices) (Zip Code)
(912) 471-2300
Registrant's telephone number, including area code:
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
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On November 4, 1998, the Registrant's parent, IKON Office Solutions, Inc.
("IKON") announced its financial results for the quarter and fiscal year ended
September 30, 1998. IKON reported a net loss of $46.2 million, or $.38 per
share in the fourth quarter before transformation costs. This loss includes
pretax charges of $40.4 million for expenses related to the closing of under-
performing branches, executive severance packages, and the settlement of
lawsuits. After transformation costs, IKON had a net loss of $61.7 million, or
$.49 per share.
For the fourth quarter of fiscal 1997, IKON had net earnings of $51.4 million,
or $.35 per share, before transformation costs, and net earnings of $33.0
million, or $.21 per share, including transformation costs.
IKON's new management team initiated a program in the fourth quarter of 1998 to
increase productivity and reduce costs. Although IKON is beginning to see a
positive impact from this program and revenues continue to grow, results for the
quarter were still affected by declining gross margins and certain under-
performing operations. IKON is expanding and accelerating its aggressive
program to cut costs and increase productivity. As a result, IKON expects its
financial performance will begin to show improvement in fiscal 1999 and that it
can achieve earnings per share in the range of $.65 to $.75 for the year.
For the 1998 fiscal year's fourth quarter, IKON's revenues increased to $1.43
billion from $1.39 billion a year ago, a 2.5% gain.
For fiscal 1998, IKON had a net loss of $32.3 million or $.38 per share, before
transformation costs. This loss includes pretax charges of $150 million.
After transformation costs, the loss was $83.1 million, or $.76 per share.
Revenues for fiscal 1998 increased to $5.6 billion from $5.1 billion in fiscal
1997, a 10% gain.
For further information, the Registrant has filed IKON's press release dated
November 4, 1998 as an exhibit to this Report.
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, IKON's successful
management of the integration of acquired 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
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and uncertainties relating to conducting operations in a competitive
environment; delays, difficulties, technological changes, management transitions
and employment issues associated with the consolidation of business operations;
risks and uncertainties associated with IKON's implementation of a preferred
vendor program; risks and uncertainties relating to potential year 2000
deficiencies associated with the operation of IKON's internal systems and
distributed products; debt service requirements (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.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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(c) Exhibits
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(99) IKON's Press Release dated November 4, 1998
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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.
IOS CAPITAL, INC.
By: /s/ Harry Kozee
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Harry Kozee
Vice President - Finance
Dated: November 4, 1998
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CONTACTS:
Susan G. Gaffney Veronica L. Rosa
Investor Relations Investor Relations
610-408-7292 610-408-7196
[email protected] [email protected]
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IKON OFFICE SOLUTIONS ANNOUNCES 4TH QUARTER RESULTS
Company Focusing on Aggressive Program to Improve Cost-Competitiveness and
Productivity
Sees Corrective Actions Leading to Improved Performance in Fiscal 1999 with EPS
of $.65 to $.75
VALLEY FORGE, PENNSYLVANIA - NOVEMBER 4, 1998 - IKON Office Solutions (NYSE:
IKN) today reported financial results for the fourth quarter and fiscal year
ended September 30, 1998.
IKON had a net loss of $46.2 million, or $.38 per share in the fourth quarter
before transformation costs. This loss includes pretax charges of $40.4 million
for expenses related to the closing of under-performing branches, executive
severance packages, and the settlement of lawsuits. After transformation costs,
the Company had a net loss of $61.7 million, or $.49 per share.
For the fourth quarter of fiscal 1997, IKON had net earnings of $51.4 million,
or $.35 per share, before transformation costs, and net earnings of $33.0
million, or $.21 per share, including transformation costs.
The Company's new management team initiated a program in the fourth quarter of
1998 to increase productivity and reduce costs. Although IKON is beginning to
see a positive impact from this program and revenues continue to grow, results
for the quarter were still affected by declining gross margins and certain
under-performing operations. The Company is expanding and accelerating its
aggressive program to cut costs and increase productivity. As a result, IKON
expects its financial performance will begin to show improvement in fiscal 1999
and that it can achieve earnings per share in the range of $.65 to $.75 for the
year.
For the 1998 fiscal year's fourth quarter, revenues increased to $1.43 billion
from $1.39 billion a year ago, a 2.5% gain.
1998 FULL-YEAR RESULTS
For fiscal 1998, the Company had a net loss of $32.3 million or $.38 per share,
before transformation costs. This loss includes pretax charges of $150 million.
After transformation costs, the loss was $83.1 million, or $.76 per share.
Revenues for fiscal 1998 increased to $5.6 billion from $5.1 billion in fiscal
1997, a 10% gain.
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COST-COMPETITIVENESS AND PRODUCTIVITY
"Although our revenues and customer base continued to grow, the Company
obviously did not perform well in the fourth quarter because of the ongoing
impact of problems that have hurt our profitability for some time now," stated
James J. Forese, President and Chief Executive Officer of IKON. "Primarily,
those factors are pressure on equipment margins due to discounting and operating
inefficiencies, particularly in some under-performing regions of our business.
"We are seeing signs of improvement. We believe our efforts to stabilize gross
margins, strengthen productivity and reduce costs are gradually having a
positive effect. At the same time, 65% of sales in our Business Services
operations, 90% of sales in our Document Services operations, excluding
Management Services, and 55% of sales in our Technology Services operations
generated strong returns, consistent with the Company's targets for the quarter.
However, it is clear that we are by no means where we should be.
"When I became CEO this past summer, I stated that my management team and I
would do whatever it takes to achieve much greater cost-competitiveness and
productivity. Our goal is to be at least as efficient and profitable as any
other company in our industry. Now, with one full quarter behind our new team,
we know that we have to pursue this objective even more aggressively by
immediately expanding our program to contain costs and improve productivity.
Already we:
* Have eliminated 820 non-productive sales positions and 731 other positions in
Business Services, North America from our second quarter peak in fiscal 1998;
* Are reducing the total IKON workforce, excluding production workers, by
another 2,000 jobs, primarily though attrition;
* Have closed six under-performing field offices in Document Services in the
fourth quarter;
* Plan to close a Technology Services company and additional Document Services
offices in the first quarter of this fiscal year if evidence of improvement
is not visible;
* Have merged six Business Services marketplaces to achieve greater economies
of operation;
* Are changing sales compensation to tie it more closely to gross profit,
rather than revenue;
* Are realigning sales territories to generate higher volumes and margins;
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* Are introducing a national sales training curriculum, to be sure that our
entire sales force is targeting the right customers in the most promising
markets with the appropriate mix of products; and
* Have hired PricewaterhouseCoopers to help identify ways of achieving a still
higher level of efficiency over the next two years. This analysis will
determine how we can deliver greater value more economically, gain greater
vendor support and otherwise sharpen our performance. It will look closely at
all aspects of the Company's cost structure and productivity. This is aimed
at taking us to a level of capability that will, in fact, make us fully
competitive with the most efficient players in our industry.
"These efforts will sustain the positive momentum from the initiatives we
announced earlier, such as: restructuring our business districts nation-wide
using IKON's successful Northeast district as a model; increasing our sales
focus on fast-growing segments like high-end, digital and color products;
creating integrated marketing on a nation-wide basis; and centralizing financial
reporting.
"In taking all these actions, we are building on a secure foundation. IKON has
a broad product line from the top vendors. We offer an unparalleled range of
services key to office management. And we have an ongoing commitment to high-
quality, personal service at the local level.
"Based on recent market research, we know that we have a strong franchise in our
business regions and are valued for the highly personalized service we provide.
The research shows that the quality of our people sharply distinguishes us from
the competition. All this makes it clear that we have a solid business a
business that can reach its potential through tough-minded management."
IKON Office Solutions (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 to copy center management,
technology training and electronic file conversion. With fiscal 1998 revenues
of $5.6 billion, IKON has more than 1,100 locations in the U.S., Canada, Mexico,
the United Kingdom, France, Germany and Denmark.
This news release includes information that 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 risk and uncertainties such as
those relating to conducting activities in a competitive environment; delays,
difficulties, management transitions and employment issues associated with
consolidation of business operations; managing the integration of acquired
companies; risks and uncertainties associated with implementation of a preferred
vendor program and general economic conditions. Therefore, actual results may
differ materially from the forward-looking statements.
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