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 28, 1999
IOS CAPITAL, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE File No. 0-20405 23-2493042
- ---------------------------- ---------------- -------------
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification
Number)
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)
<PAGE>
Item 5. Other Events.
A press release issued by the Registrant's parent, IKON Office
Solutions, Inc. ("IKON"), dated July 28, 1999, regarding IKON's financial
results for the period ended June 30, 1999, including unaudited consolidated
statements of income for the three months ended June 30, 1999 and the nine
months ended June 30, 1999 is attached.
This Report includes or incorporates by reference information which may
constitute forward-looking statements within the meaning of the federal
securities laws. Although the Registrant 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 information is based
upon management's current plans or expectations and is subject to a number of
risks and uncertainties that could significantly affect current plans,
anticipated actions and the Registrant's and/or IKON's future financial
condition and results. These risks and uncertainties, which apply to both the
Registrant and IKON, include, but are not limited to, risks and uncertainties
relating to conducting operations in a competitive environment; 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 the
Registrant's 1998 Annual Report on Form 10-K filed with the Securities and
Exchange Commission. As a consequence of these and other risks and
uncertainties, 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.
c. The following exhibits are furnished in accordance with the provisions of
Item 601 of Regulation S-K:
(99) IKON's Press Release dated July 28, 1999
<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.
IOS CAPITAL, INC.
By: /s/ Harry Kozee
-------------------------------
Harry Kozee
Vice President - Finance
Dated: July 28, 1999
Exhibit 99
Contacts:
Susan G. Gaffney Veronica L. Rosa
Investor Relations Investor Relations
610-408-7292 610-408-7196
[email protected] [email protected]
IKON OFFICE SOLUTIONS ANNOUNCES THIRD
QUARTER RESULTS
REPORTS INCREASE OVER PRIOR QUARTER AND YEAR AGO
SEES ONGOING BENEFITS FROM PRODUCTIVITY AND COMPETITIVENESS PROGRAMS
Valley Forge, Pennsylvania - July 28, 1999 -- IKON Office Solutions (NYSE:
IKN) today reported results for the third quarter of fiscal 1999. IKON generated
net income of $27.3 million or $.18 per share, up from $22.9 million, or $.15
per share, for the second quarter of this fiscal year.
For the third quarter of fiscal 1998, the Company generated a net loss of
$10.6 million or $.11 per share before transformation costs of $16 million and
special charges of $94 million before tax.
"We are pleased with the continuing improvements generated by our
productivity and competitiveness programs," stated James J. Forese, President
and Chief Executive Officer. "We posted strong earnings growth and solid
revenues this quarter."
"Sustaining the momentum of prior quarters, the quality of our business
continues to strengthen, allowing us to increase our investments in long-term
growth opportunities for the Company. These investments include expanded
training for sales and service professionals, a global branding campaign and key
initiatives designed to better leverage IKON. We will also look to expand the
sales force in key growth areas such as color, high volume, and major accounts
as our national sales model becomes more firmly established."
Revenues for the third quarter of fiscal 1999 were $1.39 billion, compared
to $1.42 billion in the third quarter of fiscal 1998 without special charges and
$1.37 billion in the second quarter of 1999. Revenues increased from this year's
prior quarter, but were slightly down year over year -- due primarily to
reductions in and realignment of the sales force, as well as the closure or
consolidations of 22 Document Services branches and two Technology Services
companies over the course of the year. These actions were taken to strengthen
productivity, tighten marketing disciplines, and build a solid cost-competitive
infrastructure.
<PAGE>
The Company's gross margin for the 1999 third quarter was 37.8%, an
increase of 20 basis points from the second quarter of 1999 that stems largely
from improved service margins. Service margins increased by 170 basis points
from the second quarter of fiscal 1999, reflecting the growing discipline and
productivity from the national sales model, which includes a focus on protecting
and growing aftermarket. Improved service margins were partially offset by a
decline in equipment margins due to continued price pressure in analog sales and
to the closing of a portion of the Company's remanufacturing operations in June.
As previously announced, in an effort to achieve better economies of scale, the
Company consolidated its three North American remanufacturing operations into
one plant located in Mexico.
IKON continues to show improvement in Selling, General and Administrative
expenses (SG&A) as a result of the ongoing expense reduction programs launched
in the second half of fiscal 1998. Expenses in the third quarter declined as a
percent of revenue by 70 basis points from the second quarter. "As we previously
stated, our goal for fiscal 1999 is to reduce our SG&A expenses by 200 basis
points from the fourth quarter of fiscal 1998 level excluding charges." stated
Mr. Forese. "Toward that end, we have reduced expenses by 140 basis points, or
$35 million, as of the end of the third quarter."
During the quarter, in an ongoing effort to increase productivity and to
position itself for growth, the Company:
o Expanded the implementation of the new sales model in North America, which
is designed to maximize the Company's national presence and marketing
capabilities in key focus areas, to over 70%;
o Increased color and digital equipment revenues to more than 60% of total
equipment sales;
o Combined Business Services and Management Services into IKON North America,
to leverage the 4,000 person sales force and expand the marketing of
management services, which includes document handling, mailroom
administration and related information management services at clients'
facilities; and
o Began investing in a new digital service offering for legal documents,
which will enable customers to manage the entire life cycle of their
documents from a remote location, through digital scanning, coding and
archiving capabilities.
"We continue to hold steadfast to our goal of building a company that can
deliver optimal added value to its customers by providing solutions that reflect
a thorough understanding of their business needs," Mr. Forese said. "IKON has a
number of key demonstrable strengths to support this goal, including a strong
cash flow and recurring revenue stream, a broad array of products and services
and a highly skilled and dedicated workforce."
<PAGE>
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 and digital document services
to copy center management, technology training and electronic file conversion.
With fiscal 1998 revenues of $5.6 billion, IKON has more than 1,000 locations
including the United States, Canada, Mexico, the United Kingdom, France, Germany
and Denmark.
This news release includes information which may constitute forward-looking
statements within the meaning of the federal securities laws. 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 information is based upon management's current plans or
expectations and is subject to a number of risks and uncertainties that could
significantly affect current plans, anticipated actions and IKON's future
financial condition and results. These risks and uncertainties include, but are
not limited to, risks and uncertainties relating to conducting operations in a
competitive environment; 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 1998 Annual Report on Form 10-K/A filed with the Securities and
Exchange Commission. As a consequence of these and other risks and
uncertainties, 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 IKON.
# # #
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended June 30,
-----------------------------------------------
1999 1998 % Change
------------ ----------- ------------
<S> <C> <C> <C>
Revenues
Net sales $ 719,047 $ 721,044 (0.3)%
Service and rentals 586,850 594,806 (1.3)
Finance income 79,570 78,878 0.9
- -----------------------------------------------------------------------------------------------------------
1,385,467 1,394,728 (0.7)
- -----------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 500,614 520,442 (3.8)
Service and rental costs 331,240 351,701 (5.8)
Finance interest expense 30,553 33,171 (7.9)
Selling and administrative 455,043 543,703 (16.3)
Loss from asset impairment 20,000
Transformation costs 16,539
- -----------------------------------------------------------------------------------------------------------
1,317,450 1,485,556 (11.3)
- -----------------------------------------------------------------------------------------------------------
Operating income (loss) 68,017 (90,828) (174.9)
Interest expense 17,031 17,684 (3.7)
- -----------------------------------------------------------------------------------------------------------
Income (loss) before taxes 50,986 (108,512) (147.0)
Income taxes (benefit) 23,708 (19,867) (219.3)
- -----------------------------------------------------------------------------------------------------------
Net income (loss) 27,278 (88,645) (130.8)
- -----------------------------------------------------------------------------------------------------------
Less preferred dividends 4,885
- -----------------------------------------------------------------------------------------------------------
Available to common shareholders $ 27,278 $ (93,530) (129.2)
=========== ===========
Basic Earnings (Loss) Per Share $ 0.18 ($ 0.69)
=========== ===========
Diluted Earnings (Loss) Per Share $ 0.18 ($ 0.69)
=========== ===========
Weighted Average Common Shares Outstanding, Basic 148,787 135,581 9.7%
=========== ===========
Weighted Average Common Shares Outstanding, Diluted 149,115 135,581 10.0%
=========== ===========
Operations Analysis:
Gross profit %, net sales 30.4% 27.8%
Gross profit %, service and rentals 43.6% 40.9%
Gross profit %, finance subsidiaries 61.6% 57.9%
Total gross profit % 37.8% 35.1%
SG&A as a % of revenue 32.9% 39.0%
Operating income (loss) % of revenue 4.9% -6.5%
Oper inc (loss) % of rev, excl trans costs and asset impairment loss -3.9%
</TABLE>
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
------------------------------------------------
1999 1998 % Change
----------- ----------- ----------
<S> <C> <C> <C>
Revenues
Net sales $ 2,146,828 $ 2,236,092 (4.0)%
Service and rentals 1,754,734 1,740,694 0.8
Finance income 252,972 223,788 13.0
- ----------------------------------------------------------------------------------------------------
4,154,534 4,200,574 (1.1)
- ----------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 1,464,723 1,490,189 (1.7)
Service and rental costs 1,007,930 1,028,514 (2.0)
Finance interest expense 92,539 96,876 (4.5)
Selling and administrative 1,393,917 1,450,307 (3.9)
Loss from asset impairment 20,000
Transformation costs 54,250
- ----------------------------------------------------------------------------------------------------
3,959,109 4,140,136 (4.4)
- ----------------------------------------------------------------------------------------------------
Operating income 195,425 60,438 223.3
Interest expense 55,573 50,956 9.1
- ----------------------------------------------------------------------------------------------------
Income before taxes 139,852 9,482 1,374.9
Income taxes 61,031 30,852 97.8
- ----------------------------------------------------------------------------------------------------
Net income (loss) 78,821 (21,370) (468.8)
- ----------------------------------------------------------------------------------------------------
Less preferred dividends 14,655
- ----------------------------------------------------------------------------------------------------
Available to common shareholders $ 78,821 $ (36,025) (318.8)
=========== ===========
Basic Earnings (Loss) Per Share $ 0.53 ($ 0.27)
=========== ===========
Diluted Earnings (Loss) Per Share $ 0.53 ($ 0.27)
=========== ===========
Weighted Average Common Shares Outstanding, Basic 148,576 134,799 10.2%
=========== ===========
Weighted Average Common Shares Outstanding, Diluted 148,961 134,799 10.5%
=========== ===========
Operations Analysis:
Gross profit %, net sales 31.8% 33.4%
Gross profit %, service and rentals 42.6% 40.9%
Gross profit %, finance subsidiaries, excl. gain 61.2% 56.7%
Total gross profit %, excl. gain 38.0% 37.7%
SG&A as a % of revenue, excl. gain 33.6% 34.5%
Operating income % of revenue, excl. gain 4.4% 1.4%
Oper inc % of rev, excl trans costs and asset impairment loss 3.2%
</TABLE>
<PAGE>
IKON Office Solutions, Inc.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended June 30, 1999
1st Qtr. 2nd Qtr. 3rd Qtr. Total
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 707,719 $ 720,062 $ 719,047 $2,146,828
Service and rentals 591,417 576,467 586,850 1,754,734
Finance income 97,281 ** 76,121 79,570 252,972
- -------------------------------------------------------------------------------------------------------------
1,396,417 1,372,650 1,385,467 4,154,534
- -------------------------------------------------------------------------------------------------------------
Costs and Expenses
Cost of goods sold 471,746 492,363 500,614 1,464,723
Service and rental costs 341,589 335,101 331,240 1,007,930
Finance interest expense 32,680 29,306 30,553 92,539
Selling and administrative expense 477,255 461,619 455,043 1,393,917
- -------------------------------------------------------------------------------------------------------------
1,323,270 1,318,389 1,317,450 3,959,109
- -------------------------------------------------------------------------------------------------------------
Operating income 73,147 54,261 68,017 195,425
Interest expense 19,547 18,995 17,031 55,573
- -------------------------------------------------------------------------------------------------------------
Income before taxes 53,600 35,266 50,986 139,852
Taxes on income 24,924 12,399 23,708 61,031
- -------------------------------------------------------------------------------------------------------------
Net income available to shareholders $ 28,676 $ 22,867 $ 27,278 $ 78,821
========== ========== ========== ==========
Basic EPS $ 0.19 $ 0.15 $ 0.18 $ 0.53
========== ========== ========== ==========
Shares 148,349 148,601 148,787 148,576
========== ========== ========== ==========
Diluted EPS $ 0.19 $ 0.15 $ 0.18 $ 0.53
========== ========== ========== ==========
Shares 148,907 148,870 149,115 148,961
========== ========== ========== ==========
Operational Analysis:
Gross profit %, net sales 33.3% 31.6% 30.4% 31.8%
Gross profit %, service and rentals 42.2% 41.9% 43.6% 42.6%
Gross profit %, financing, excl. gain 60.6% 61.5% 61.6% 61.2%
Total gross profit, excl. gain 38.8% 37.6% 37.8% 38.0%
SG&A as a % of revenue, excl. gain 34.5% 33.6% 32.9% 33.6%
Operating income % of revenue, excl gain 4.3% 4.0% 4.9% 4.4%
<FN>
** - Includes $14.3 million gain on asset securitization
</FN>
</TABLE>
