UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)*
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934 for the quarterly period ended June 30, 1998 or [ ] Transition
report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from _____ to _____
Commission file number 0-20405
IOS CAPITAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 23-2493042
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1738 Bass Road, Macon, Georgia 31210
(Address of principal executive offices)
(Zip Code)
(912) 471-2300
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
* Applicable only to issuers involved in bankruptcy proceedings during the
preceding five years:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
* Applicable only to corporate issuers:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of August 7, 1998.
Common Stock, $.01 par value per share 1,000 shares
Registered Debt Outstanding as of August 7, 1998 $1,674,750,000
The registrant, an indirect wholly owned subsidiary of IKON Office Solutions,
Inc. ("IKON"), meets the conditions set forth in General Instruction H(1)(a) and
(b) of Form 10-Q and is, therefore, filing with the reduced disclosure format
contemplated thereby.
<PAGE>
INDEX
IOS CAPITAL, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheets--June 30, 1998 and
September 30, 1997
Statements of Income--Three and nine months ended
June 30, 1998 and June 30, 1997
Statements of Cash Flows--Nine months ended
June 30, 1998 and June 30, 1997
Notes to Financial Statements--June 30, 1998
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
PART I . FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
IOS Capital, Inc.
BALANCE SHEETS
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
-------------------- -----------------
Assets
<S> <C> <C>
Investment in leases:
Direct financing leases $1,965,315 $1,640,559
Less: Unearned income (338,932) (286,769)
-------------------- -----------------
1,626,383 1,353,790
Funded leases, net 573,924 485,658
-------------------- -----------------
2,200,307 1,839,448
Accounts receivable 58,353 55,589
Due from IKON Office Solutions 16,111 4,463
Prepaid expenses and other assets 12,799 13,436
Leased equipment-operating rentals at cost,
less accumulated depreciation of:
6/98 - $40,026; 9/97 - $ 33,598 70,981 50,945
Property and equipment at cost, less
accumulated depreciation of:
6/98 - $5,102; 9/97 - $ 3,771 11,981 12,330
==================== =================
Total assets $2,370,532 $1,976,211
==================== =================
Liabilities and shareholder's equity
Liabilities:
Accounts payable and accrued expenses $46,051 $51,018
Accrued interest 6,354 27,785
Notes payable to banks 225,000 25,000
Medium term notes 1,674,750 1,542,250
Deferred income taxes 100,883 64,177
-------------------- -----------------
Total liabilities 2,053,038 1,710,230
Shareholder's equity:
Common Stock - $.01 par value, 1,000 shares
authorized, issued, and outstanding
Contributed capital 149,415 144,415
Retained earnings 168,079 121,566
-------------------- -----------------
Total shareholder's equity 317,494 265,981
==================== =================
Total liabilities and shareholder's equity $2,370,532 $1,976,211
==================== =================
</TABLE>
See notes to financial statements.
<PAGE>
IOS Capital, Inc.
STATEMENTS OF INCOME
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Revenues:
Lease finance income $56,904 $44,494 $163,170 $122,051
Rental income 10,138 6,545 28,287 16,473
Interest on IKON tax deferrals 3,944 3,148 11,449 8,772
Other income 3,035 2,090 8,400 5,921
-------- -------- -------- --------
74,021 56,277 211,306 153,217
Expenses:
Interest 27,382 22,075 80,455 59,303
General and administrative 17,658 16,634 53,401 44,706
-------- -------- -------- --------
45,040 38,709 133,856 104,009
Gain on sale of lease receivables 710 642 1,891 1,919
-------- -------- -------- --------
Income before income taxes 29,691 18,210 79,341 51,127
Provision for income taxes 12,471 7,466 32,828 20,962
-------- -------- -------- --------
Net income $17,220 $10,744 $46,513 $30,165
======== ======== ======== ========
</TABLE>
See notes to financial statements.
<PAGE>
IOS Capital, Inc.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1998 1997
Operating activities:
<S> <C> <C>
Net income $46,513 $30,165
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 25,239 13,743
Provision for deferred taxes 36,706 20,174
Gain on sale of lease receivables (1,891) (1,919)
Changes in operating assets and liabilities:
Accounts receivable (2,764) (3,764)
Prepaid expenses and other assets 2,528 4,112
Accounts payable and accrued expenses (4,967) (5,074)
Accrued interest (21,431) (15,612)
---------- ----------
Net cash provided 79,933 41,825
---------- ----------
Investing activities:
Purchases of leased equipment, net (43,917) (24,746)
Purchases of property and equipment, net (1,009) (5,005)
Direct financing leases:
Additions (1,015,101) (884,826)
Cancellations 204,855 139,510
Collections 458,817 343,578
Proceeds from sale 78,836 77,251
Funded leases:
Additions (272,724) (314,058)
Cancellations 55,038 49,518
Collections 129,420 134,416
---------- ----------
Net cash used (405,785) (484,362)
---------- ----------
Financing activities:
Proceeds from bank borrowings 200,000
Payments on bank borrowings (33,000)
Proceeds from issuance of medium term notes 348,500 632,350
Payments on medium term notes (216,000) (126,000)
Capital contributed by IKON 5,000 32,000
---------- ----------
Net cash provided 337,500 505,350
---------- ----------
Increase in amounts due from IKON 11,648 62,813
Due from (to) IKON at beginning of year 4,463 (24,330)
---------- ----------
Due from IKON at end of period $16,111 $38,483
---------- ----------
</TABLE>
See notes to financial statements
<PAGE>
IOS Capital, Inc.
Notes to Financial Statements
June 30, 1998
Note 1: Basis of Presentation
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the financial statements and
footnotes thereto included in the Company's annual report on Form 10-K for the
year ended September 30, 1997.
Note 2: Medium Term Note Program
During the nine months ended June 30, 1998, IOS Capital issued $348.5
million under its medium term note program. At June 30, 1998, $1,674.8 million
of medium term notes were outstanding with a weighted average interest rate of
6.5%. The remaining amount available under this registration statement is
$1,298.2 million.
Note 3: Asset Securitization
IOS Capital has asset securitization agreements for $275 million of
eligible direct financing receivables that expire September 1998 ($150 million)
and March 1999 ($125 million). Both of these agreements are expected to be
renewed. Under these agreements, the Company sold $78.8 million in direct
financing leases during the first nine months of fiscal 1998, replacing leases
which had been liquidated during the period and recognized a pretax gain of
approximately $1.9 million. Under the terms of the sales agreements, the Company
will continue to service the lease portfolio.
Note 4: Name Change
On January 22, 1998, the Company changed its name from IKON Capital,
Inc. to IOS Capital, Inc.
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Pursuant to General Instruction H(2) (a) of Form 10-Q, the following analysis of
the results of operations is presented in lieu of Management's Discussion and
Analysis of Financial Condition and Results of Operations.
Three Months Ended June 30, 1998 Compared
with the Three Months Ended June 30, 1997
Comparative summarized results of operations for the three months ended June 30,
1998 and 1997 are set forth in the table below. This table also shows the
increase in the dollar amounts of major revenue and expense items between
periods, as well as the related percentage increase.
<TABLE>
<CAPTION>
Three Months
(dollars in thousands) Ended June 30 Increase
1998 1997 Amount Percent
<S> <C> <C> <C> <C>
Revenues:
Lease finance income $56,904 $44,494 $12,410 27.9%
Rental income 10,138 6,545 3,593 54.9%
Interest on IKON tax deferrals 3,944 3,148 796 25.3%
Other income 3,035 2,090 945 45.2%
------- ------- -------
74,021 56,277 17,744 31.5%
Expenses:
Interest 27,382 22,075 5,307 24.0%
General and administrative 17,658 16,634 1,024 6.2%
------- ------- -------
45,040 38,709 6,331 16.4%
Gain on sale of lease receivables 710 642 68 10.6%
------- ------- -------
Income before income taxes 29,691 18,210 11,481 63.0%
Provision for income taxes 12,471 7,466 5,005 67.0%
------- ------- -------
Net income $17,220 $10,744 $6,476 60.3%
======= ======= ======
</TABLE>
Revenues
Total revenues increased $17.7 million or 31.5% in the third quarter of fiscal
1998 compared to the third quarter of fiscal 1997. Approximately 69.9% or $12.4
million of this increase in revenues was a result of increased lease finance
income due to continued growth in the portfolio of direct financing and funded
leases. The lease portfolio, net of lease receivables that were sold in asset
securitization transactions, increased 29.0 % from June 30, 1997 to June 30,
1998.
Office equipment placed on rental by the IKON marketplaces to customers, with
cancelable terms, may be purchased by the Company. During the third quarters of
fiscal 1998 and 1997, IOS Capital purchased operating lease equipment of $15.8
million and $8.3 million, respectively. Operating leases contributed $10.1
million in rental income during the third quarter of fiscal 1998, compared to
$6.5 million in the third quarter of fiscal 1997.
<PAGE>
The Company earns interest income on the deferred tax liabilities of the IKON
marketplaces associated with leases funded through the Company at a rate
consistent with the Company's weighted average outside borrowing rate of
interest. The Company's average rate was 6.5% for the third quarter of fiscal
1998 and 6.7% for the third quarter of fiscal 1997. In addition, the deferred
tax base upon which these payments are calculated increased 28.8% to $259.4
million at June 30, 1998 from $201.4 million at June 30, 1997. Primarily as a
result of the increased deferred tax liabilities, interest income on deferred
taxes rose $796,000 or 25.3% when comparing the three months ended June 30, 1998
to the three months ended June 30, 1997.
Other income consists primarily of late payment charges and various billing
fees. The structure of these fees has remained basically unchanged from fiscal
1997. The growth in other income from fees is primarily due to the increased
size of the lease portfolio upon which these fees are based. Overall, fee income
from these sources grew by $.9 million or 45.2%, when comparing the third
quarter of fiscal 1998 to the same period of fiscal 1997.
Expenses
Average borrowings to finance the lease portfolio in the form of loans from
banks and the issuance of medium term notes in the public market increased by
26.5% from June 30, 1997, to $1,899.8 million outstanding at June 30, 1998. The
Company paid a weighted average interest rate on all borrowings of 6.5% for the
third quarter of fiscal 1998 and 6.7% for the third quarter of fiscal 1997.
Primarily as a result of the increased borrowings, interest expense grew by $5.3
million or 24.0%, when comparing the third quarter of fiscal 1998 to the third
quarter of fiscal 1997. At June 30, 1998, the Company's debt to equity ratio,
including intercompany amounts due from IKON was 5.9 to 1. On August 14, 1998,
Standard and Poor's lowered its credit ratings one level for the Company and
IKON to "BBB+" from "A-" and Moody's Investor Service lowered its credit ratings
one level on the Company and IKON to "Baa1" from "A3".
Total general and administrative expenses for the quarter ended June 30, 1998
increased by $1.0 million or 6.2%, over the quarter ended June 30, 1997. The
general and administrative expense category in the third quarter of fiscal 1998
includes depreciation expense on leased equipment totaling $8.5 million,
compared to $5.2 million for the third quarter of fiscal 1997. In addition, the
general and administrative expense category includes lease bonus subsidy
payments to either IKON or directly to the IKON marketplaces, based on the level
of dealer participation in the Company's leasing programs or for the funding of
targeted new lease volume. During the third quarter of fiscal 1998, lease bonus
subsidy payments totaled $3.7 million compared to $2.1 million during the third
quarter of fiscal 1997. Excluding the effects of increased depreciation expense
on operating leases and lease bonus subsidy payments, remaining general and
administrative expenses decreased by $3.9 million or 41.6% compared to general
and administrative expenses in the third quarter of fiscal 1997. This decrease
is due to recent cost controls initiated within the Company.
Gain on Sale of Lease Receivables
The Company has asset securitization agreements for $275 million of eligible
direct financing lease receivables that expire September 1998 ($150 million) and
March 1999 ($125 million). Both of these agreements are expected to be renewed.
As collections reduce previously sold interests, new leases can be sold up to
the agreement amount. During the three months ended June 30, 1998, collections
reduced previously sold interests by approximately $26.6 million on these two
agreements. The Company sold an additional $26.6 million in net eligible direct
financing leases during the third quarter of fiscal 1998 and recognized pretax
gains of $710,000.
<PAGE>
Income Before Income Taxes
Income before income taxes for the third quarter of fiscal 1998 increased by
$11.5 million or 63.0% over the third quarter of fiscal 1997. This increase in
income before income taxes was essentially the effect of higher earnings due to
a larger lease portfolio base, net of increased general and administrative
expenses, partially offset by higher borrowing costs resulting from increased
debt to fund the lease portfolio.
Provision for Income Taxes
Income taxes for the third quarter of fiscal 1998 increased by $5.0 million or
67.0% over the third quarter of fiscal 1997. This increase in income taxes is
directly attributable to the increase in income before taxes in the third
quarter of fiscal 1998 compared to the third quarter of fiscal 1997. The
effective tax rate was 42% in the third quarter of fiscal 1998 compared to 41%
in the third quarter of fiscal 1997.
Nine Months Ended June 30, 1998 Compared
with the Nine Months Ended June 30, 1997
Comparative summarized results of operations for the nine months ended June 30,
1998 and 1997 are set forth in the table below. This table also shows the
increase in the dollar amounts of major revenue and expense items between
periods, as well as the related percentage increase.
<TABLE>
<CAPTION>
Nine Months
(dollars in thousands) Ended June 30 Increase
1998 1997 Amount Percent
<S> <C> <C> <C> <C>
Revenues:
Lease finance income $163,170 $122,051 $41,119 33.7%
Rental income 28,287 16,473 11,814 71.7%
Interest on IKON tax deferrals 11,449 8,772 2,677 30.5%
Other income 8,400 5,921 2,479 41.9%
------- ------- -------
211,306 153,217 58,089 37.9%
Expenses:
Interest 80,455 59,303 21,152 35.7%
General and administrative 53,401 44,706 8,695 19.4%
------- ------- -------
133,856 104,009 29,847 28.7%
Gain on sale of lease receivables 1,891 1,919 (28) (1.5)%
------- ------- -------
Income before income taxes 79,341 51,127 28,214 55.2%
Provision for income taxes 32,828 20,962 11,866 56.6%
------- ------- -------
Net income $46,513 $30,165 $16,348 54.2%
======= ======= =======
</TABLE>
Revenues
Total revenues increased $58.1 million or 37.9% in the first nine months of
fiscal 1998 compared to the first nine months of fiscal 1997. Approximately
70.8% or $41.1 million of this increase in revenues was a result of increased
lease finance income due to continued growth in the portfolio of direct
financing and funded leases. The lease portfolio, net of lease receivables that
were sold in asset securitization transactions, increased 29.0 % from June 30,
1997 to June 30, 1998.
<PAGE>
Office equipment placed on rental by the IKON marketplaces to customers, with
cancelable terms, may be purchased by the Company. During the first nine months
of fiscal 1998 and 1997, IOS Capital purchased operating lease equipment of
$43.9 million and $24.7 million, respectively. Operating leases contributed
$28.3 million in rental income during the first nine months of fiscal 1998,
compared to $16.5 million in the first nine months of fiscal 1997.
The Company earns interest income on the deferred tax liabilities of the IKON
marketplaces associated with leases funded through the Company at a rate
consistent with the Company's weighted average outside borrowing rate of
interest. The Company's average rate was 6.5% for the first nine months of
fiscal 1998 and 6.7% for the first nine months fiscal 1997. In addition, the
deferred tax base upon which these payments are calculated increased 28.8% to
$259.4 million at June 30, 1998 from $201.4 million at June 30, 1997. Primarily
as a result of the increased deferred tax liabilities, interest income on
deferred taxes rose $2.7 or 30.5% when comparing the first nine months ended
June 30, 1998 to the first nine months ended June 30, 1997.
Other income consists primarily of late payment charges and various billing
fees. The structure of these fees has remained basically unchanged from fiscal
1997. The growth in other income from fees is primarily due to the increased
size of the lease portfolio upon which these fees are based. Overall, fee income
from these sources grew by $2.5 million or 41.9%, when comparing the first nine
months of fiscal 1998 to the same period of fiscal 1997.
Expenses
Average borrowings to finance the lease portfolio in the form of loans from
banks and the issuance of medium term notes in the public market increased by
26.5%, to $1,899.8 million outstanding at June 30, 1998 from June 30, 1997. The
Company paid a weighted average interest rate on all borrowings of 6.5% for the
first nine months of fiscal 1998 and 6.7% for the first nine months of fiscal
1997. Primarily as a result of the increased borrowings, interest expense grew
by $21.2 million or 35.7%, when comparing the first nine months of fiscal 1998
to the first nine months of fiscal 1997. At June 30, 1998, the Company's debt to
equity ratio, including intercompany amounts due to IKON was 5.9 to 1. On August
14, 1998, Standard and Poor's lowered its credit ratings one level for the
Company and IKON to "BBB+" from "A-" and Moody's Investor Service lowered its
credit ratings one level on the Company and IKON to "Baa1" from "A3".
Total general and administrative expenses for the first nine months ended June
30, 1998 increased by $8.7 million or 19.4%, over the first nine months ended
June 30, 1997. The general and administrative expense category in the first nine
months of fiscal 1998 includes depreciation expense on leased equipment totaling
$23.9 million, compared to $13.1 million for the first nine months of fiscal
1997. In addition, the general and administrative expense category includes
lease bonus subsidy payments to either IKON or directly to the IKON
marketplaces, based on the level of dealer participation in the Company's
leasing programs or for the funding of targeted new lease volume. During the
first nine months of fiscal 1998, lease bonus subsidy payments totaled $11.3
million compared to $7.7 million during the first nine months of fiscal 1997.
Excluding the effects of increased depreciation expense on operating leases and
lease bonus subsidy payments, remaining general and administrative expenses
decreased by $5.7 million or 23.8% compared to general and administrative
expenses in the first nine months of fiscal 1997. This decrease is due to recent
cost controls initiated within the Company.
Gain on Sale of Lease Receivables
The Company has asset securitization agreements for $275 million of eligible
direct financing lease receivables that expire September 1998 ($150 million) and
March 1999 ($125 million). Both of these agreements are expected to be renewed.
As collections reduce previously sold interests, new leases can be sold up to
the agreement amount. During the nine months ended June 30, 1998, collections
reduced previously sold interests by approximately $78.8 million on these two
agreements. The Company sold an additional $78.8 million in net eligible direct
financing leases during the first nine months of fiscal 1998 and recognized
pretax gains of $1.9 million.
<PAGE>
Income Before Income Taxes
Income before income taxes for the first nine months of fiscal 1998 increased by
$28.2 million or 55.2% over the first nine months of fiscal 1997. This increase
in income before income taxes was essentially the effect of higher earnings due
to a larger lease portfolio base, net of increased general and administrative
expenses, partially offset by higher borrowing costs resulting from the
increased debt to fund the lease portfolio.
Provision for Income Taxes
Income taxes for the first nine months of fiscal 1998 increased by $11.9 million
or 56.6% over the first nine months of fiscal 1997. This increase in income
taxes is directly attributable to the increase in income before taxes in the
first nine months of fiscal 1998 compared to the first nine months of fiscal
1997. The effective tax rate was 41.4% for the first nine months of fiscal 1998
compared to 41% for first nine months of fiscal 1997.
FORWARD-LOOKING INFORMATION
This document contains disclosures which are forward-looking statements relating
to the Company or its parent, IKON, within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the 1934 Act. Such forward-looking statements address, among other things,
strategic initiatives (including plans for enhancing the Company's or IKON's
business through new acquisitions, information technology systems, sales
strategies, market growth plans, 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 Company'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 Company and IKON) relating to conducting operations in a competitive
environment; delays, difficulties, technological changes and employment issues
(applicable to both the Company and IKON) associated in a large-scale
transformation project; debt service requirements (applicable to both the
Company 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 Company
or IKON.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are furnished pursuant to Item 601 of
Regulation S-K:
Exhibit No. (27) Financial Data Schedule
(b) Reports on Form 8-K
On April 27, 1998, the registrant filed a Current Report on Form
8-K to file, under Item 5 of the form, the press release dated
April 22, 1998 of its parent, IKON Office Solutions, Inc. (IKON),
which reported its earnings for the fiscal quarter ended March 31,
1998, provided earnings estimates for the remainder of IKON's 1998
fiscal year and provided additional information regarding its
business, acquisitions and transformation process.
On June 29, 1998, the registrant filed a Current Report on Form 8-K
to file, under Item 5 of the form, the press release dated June 29,
1998 of its parent, IKON, indicating that IKON anticipates earnings
will be significantly lower than the First Call consensus estimate
of $.34 per share for the quarter ending June 30, 1998 and that
IKON expects to release third quarter earnings on July 22, 1998.
On July 10, 1998, the registrant filed a Current Report on Form 8-K
to file, under Item 5 of the form, the press release dated July 9,
1998 of its parent, IKON, announcing the appointment of James J.
Forese as IKON's President, Chief Executive Officer and a member of
the Board of Directors. IKON also announced that Richard A. Jalkut,
who has been a director of IKON since 1996, has been appointed
non-executive Chairman. John E. Stuart, who had served as IKON's
Chairman, President and Chief Executive Officer, has resigned his
positions with IKON.
On August 5, 1998, the registrant filed a Current Report on Form
8-K to file, under Item 5 of the form, the press release dated
August 4, 1998 of its parent, IKON, stating that IKON is in the
process of conducting the full review of operations previously
announced and that IKON's third quarter results will be announced
on August 14, 1998.
<PAGE>
SIGNATURES
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. This report has also been signed by the
undersigned in his capacity as the chief accounting officer of the Registrant.
IOS CAPITAL, INC.
Date August 14, 1998 /s/ Harry G. Kozee
Harry G. Kozee
Vice President - Finance
(Chief Accounting Officer)
<PAGE>
Index to Exhibits
Exhibit Number
(27) Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of IOS Capital, Inc. and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,258,660,000<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 128,090,000<F2>
<DEPRECIATION> 45,128,000<F2>
<TOTAL-ASSETS> 2,370,532,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,899,750,000
0
0
<COMMON> 0<F3>
<OTHER-SE> 317,494,000
<TOTAL-LIABILITY-AND-EQUITY> 2,370,532,000
<SALES> 0
<TOTAL-REVENUES> 211,306,000
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 53,401,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80,455,000
<INCOME-PRETAX> 79,341,000
<INCOME-TAX> 32,828,000
<INCOME-CONTINUING> 46,513,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,513,000
<EPS-PRIMARY> 0<F4>
<EPS-DILUTED> 0<F4>
<FN>
(1) Includes net investments in leases of $2,200,307,000 and other accounts
receivable.
(2) Includes leased equipment of: cost - $111,007,000; accumulated depreciation
- $40,026,000
(3) Common stock, $.01 par value, 1,000 shares outstanding. Since total is less
than $1,000, zero is reported.
(4) Not required as the registrant is a wholly-owned subsidiary.
</FN>
</TABLE>
