11-K 1 ikon11k12-01.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 11-K (MARK ONE) [x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2001 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to _________________. Commission file number 1-5964 A. Full title of the plan and the address of the plan, if different from that of the issuer named below: IKON OFFICE SOLUTIONS, INC. RETIREMENT SAVINGS PLAN B. Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: IKON OFFICE SOLUTIONS, INC., P.O. BOX 834, VALLEY FORGE, PA 19482-0834 REQUIRED INFORMATION a. Financial Statements. The following financial statements are furnished for the Plan. 1. Audited Statements of Net Assets Available for Benefits - December 31, 2001 and 2000 2. Audited Statements of Changes in Net Assets Available for Benefits for the years ended December 31, 2001 and 2000 3. Notes to Financial Statements 4. Supplemental Schedules (a) Schedule of Assets (Held at End of Year) (b) Schedule of Reportable Transactions b. Exhibits Exhibit 23 Consent of PricewaterhouseCoopers LLP - Independent Accountants IKON Office Solutions, Inc. Retirement Savings Plan Financial Statements and Supplemental Schedules December 31, 2001 and 2000 IKON Office Solutions, Inc. Retirement Savings Plan Index to Financial Statements and Supplemental Schedules December 31, 2001 and 2000 -------------------------------------------------------------------------------- Page(s) Financial Statements: Report of Independent Accountants 1 Statements of Net Assets Available for Benefits 2 Statements of Changes in Net Assets Available for Benefits 3 Notes to Financial Statements 4 - 10 Supplemental Schedules:* Schedule I - Schedule of Assets (Held at End of Year) 11 Schedule II - Schedule of Reportable Transactions 12 * Other schedules required by Section 2520.103-10 of the Department of Labor Rules and Regulations for Reporting and Disclosure under ERISA have been omitted because they are not applicable. Report of Independent Accountants To the Participants and Administrator of the IKON Office Solutions, Inc. Retirement Savings Plan In our opinion, the accompanying statements of net assets available for benefits and the related statements of changes in net assets available for benefits present fairly, in all material respects, the net assets available for benefits of the IKON Office Solutions, Inc. Retirement Savings Plan (the "Plan") at December 31, 2001 and 2000, and the changes in net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Plan's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets (held at end of year) and reportable transactions are presented for the purpose of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. These supplemental schedules are the responsibility of the Plan's management. The supplemental schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. PricewaterhouseCoopers LLP Philadelphia, PA June 26, 2002 IKON Office Solutions, Inc. Retirement Savings Plan Statements of Net Assets Available for Benefits December 31, 2001 and 2000 --------------------------------------------------------------------------------
2001 2000 Assets: Investments, at fair value $551,512,616 $286,363,831 ----------------- ----------------- Receivables: Investment income receivable 12,889 12,200 Receivable for investments sold 1,430,499 595,325 ----------------- ----------------- Total receivables 1,443,388 607,525 ----------------- ----------------- Total assets 552,956,004 286,971,356 ----------------- ----------------- Liabilities: Accrued administrative expenses 481,453 562,964 Payable for investments purchased 1,650,503 6,519,990 Payable to Georgia Pacific 401(k) Plan (Note 10) 151,357 - ----------------- ----------------- Total liabilities 2,283,313 7,082,954 ----------------- ----------------- Net assets available for benefits $550,672,691 $279,888,402 ================= ================= The accompanying notes are an integral part of these financial statements. - 2 -
IKON Office Solutions, Inc. Retirement Savings Plan Statements of Changes in Net Assets Available for Benefits For the Years Ended December 31, 2001 and 2000 ------------------------------------------------------------------------------------------------------------ 2001 2000 Additions: Investment income: Net appreciation (depreciation) in fair value of investments $234,011,544 $(116,180,521) Interest and dividends 6,623,168 13,353,903 Shareholder litigation settlement (Note 10) 1,963,046 - ---------------- ------------------ 242,597,758 (102,826,618) ---------------- ------------------ Contributions: Participant 56,644,373 58,920,692 Employer 26,167,958 30,305,252 ---------------- ------------------ 82,812,331 89,225,944 ---------------- ------------------ Total additions 325,410,089 (13,600,674) ---------------- ------------------ Deductions: Payment of benefits 50,147,270 49,162,745 Administrative expenses 4,478,530 4,494,428 ---------------- ------------------ Total deductions 54,625,800 53,657,173 ---------------- ------------------ Net increase (decrease) 270,784,289 (67,257,847) Net assets available for benefits: Beginning of year 279,888,402 347,146,249 ---------------- ------------------ End of year $550,672,691 $279,888,402 ================ ================== The accompanying notes are an integral part of these financial statements. -3-
IKON Office Solutions, Inc. Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 -------------------------------------------------------------------------------- 1. Description of the Plan The following description of the IKON Office Solutions, Inc. Retirement Savings Plan (the "Plan") provides only general information. Participants should refer to the Plan document for a more complete description of the Plan's provisions. General The Plan is a defined contribution plan covering all regular full-time and part-time non-union employees, as defined by the Plan, of IKON Office Solutions, Inc. (the "Company") and its domestic subsidiaries which adopt the Plan. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). Plan Administration The Plan is administered by the IKON Office Solutions, Inc. Retirement Plans Committee (the "Committee"). Effective August 1, 2000, Bankers Trust Company was appointed trustee (the "Trustee") of the Plan and custodian of the Plan's assets. During the period prior to August 2000, The Northern Trust Company was the trustee of the Plan and custodian of the Plan's assets. The Committee and Trustee of the Plan are appointed by the Board of Directors of the Company. Recordkeeping of the Plan is performed by Hewitt Associates LLC. Contributions Each year, participants may contribute up to 16 percent of their annual compensation ("Compensation"), as defined by the Plan, in multiples of one percent except for certain highly compensated participants who may be subject to certain regulatory limitations. Participants may also contribute amounts representing rollovers from other qualified plans. The Company contributes an amount equal to two-thirds of the first 6% of the Compensation that a participant contributes to the Plan. Employer matching contributions are made in IKON Office Solutions, Inc. common stock and may not be redirected by the participant to any of the other available investment options until the attainment of age 55. Effective January 1, 2002, there will be a one-year eligibility waiting period for Company matching contributions for new employees. Participant Accounts Each participant's account is credited with the participant's contribution and an allocation of (a) the Company contributions and (b) Plan earnings and charged with an allocation of administrative expenses, if any. Allocations are based on participant earnings or account balances, as defined. The benefit to which a participant is entitled is the benefit that can be provided from the participant's vested account. -4- IKON Office Solutions, Inc. Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 -------------------------------------------------------------------------------- Vesting Participants are immediately vested in their contributions plus an allocation of actual earnings thereon. Vesting in the Company's matching portion of their accounts plus actual earnings thereon is based on the following: Years of service Vesting Less than 2 years 0% 2 years 25% 3 years 50% 4 years 75% 5 years 100% Participants are also fully vested in the Company's matching portion upon retirement, position termination due to permanent shutdown of plant or department, total and permanent disability, or death. Investment Options Upon enrollment in the Plan, a participant may direct employee contributions in one-percent increments in any of the following nine investment options. o IKON Office Solutions, Inc. Common Stock Fund o Chicago Equity Partners Small-Cap Equity Fund o American Funds Group EuroPacific Growth Fund o PBHG Growth Fund o PIMCO Total Return Fund o Vanguard Institutional Index Fund o Vanguard Windsor II Fund o Vanguard Retirement Savings Trust II Fund o Balanced Fund Participants may change their investment options or transfer existing account balances to other investment options daily, except for employer matching contributions which are made in IKON Office Solutions, Inc. common stock and may not be redirected by the participant to any of the other available investment options until the attainment of age 55. As part of the proposed settlement of an ERISA class-action lawsuit brought against IKON and a number of individual defendants (Whetman et. al. v. IKON Office Solutions, Inc.), the Company has agreed to modify the Plan in order to allow participants greater flexibility with respect to investment of the Company's match portion of participants' individual accounts. Under the proposed settlement, employees who have been with the Company for at least two years will be permitted to place Company matching contributions in investment options other than IKON common stock, subject to existing vesting schedules. The court has preliminarily approved the settlement. The court will hold a hearing on the final approval of the settlement on August 8, 2002. Effective January 1, 2002, the IKON Office Solutions, Inc. Common Stock Fund was designated as an Employee Stock Ownership Plan ("ESOP") under the provisions of the Internal Revenue Code. Accordingly, participants will be allowed to elect to reinvest dividends in IKON common stock or receive a cash payment. Additionally, any dividends that are reinvested in IKON common stock will be fully vested. Participant Loans Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their vested account balance. Loan terms may not exceed 5 years; however, loan terms may extend up to 15 years for the purchase of a primary residence. Loans are -5- IKON Office Solutions, Inc. Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 -------------------------------------------------------------------------------- secured by the balance in the participant's account and bear interest, which is set in the month the loan is made, at the prime lending rate as published in the Wall Street Journal on the last Wednesday of the month plus one percent. Principal and interest are paid ratably through payroll deductions. Payment of Benefits Participants are entitled to receive a distribution equal to their vested account balances upon death, retirement, termination, or permanent disability. Participants may elect to receive benefits in either a lump-sum payment, periodic installments limited in duration by the provisions of the Plan, or by the purchase and delivery of a life annuity or qualified joint and survivor annuity contract. Participants under the age of 59 1/2 may make withdrawals from their accounts only from after-tax salary deferral contributions. Participants under the age of 59 1/2 who have participated in the Plan for at least five years may make withdrawals from their accounts derived from employer matching contributions and earnings thereon. Participants under the age of 59 1/2 who have not participated in the Plan for five years may make withdrawals of all or any portion of their vested interest derived from employer matching contributions which have been held by the Plan for at least two full plan years. Any portion of vested assets may be withdrawn by participants in the case of personal financial hardship upon approval of the plan administrator. After reaching age 59 1/2 participants may make withdrawals of any portion of their vested assets at any time without regard to financial hardship. Participants who terminate their employment with a balance of less than $5,000 may receive a direct lump-sum payment or rollover their balance into an eligible retirement plan. Participants under the age of 59 1/2 who terminate their employment with a balance greater than $5,000 may continue to maintain their account within the Plan, receive a direct lump-sum payment, or rollover their balance into an eligible retirement plan. Forfeitures During the years ended December 31, 2001 and 2000, $3,983,590 and $1,333,980, respectively, of employer matching contributions were forfeited by terminated employees before those amounts became vested. Such forfeited amounts were used to reduce future employer matching contributions. At December 31, 2001 and 2000, there were no forfeited non-vested amounts. Plan Expenses Expenses incurred in connection with the administration of the Plan are paid by the Plan. 2. Significant Accounting Policies Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting. Investment Valuation and Income Recognition The Plan's investments are stated at fair value. Shares of registered investment companies are valued at quoted market prices which represent the net asset value of shares held by the Plan at year-end. The Common Stock fund is valued at net unit value which is based upon the quoted market price of common stock and the value of cash and cash equivalents held for liquidity purposes. Participant loans are valued at cost which approximates fair value. Cash equivalents are valued at cost which is equal to market value. Common/collective funds are valued at net unit value as determined by the Trustee. Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. -6- IKON Office Solutions, Inc. Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 -------------------------------------------------------------------------------- Net appreciation on investments represents the sum of the change in the difference between year-end market value and cost and the difference between the proceeds received and the cost of investments sold. Payment of Benefits Benefits are recorded when paid. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions and deductions during the reporting period. Actual results could differ from those estimates. 3. Investments The following investments represent five percent or more of the Plan's net assets: December 31, 2001 IKON Office Solutions, Inc. Common Stock Fund (non-participant directed investment) (See Note 4) $ 321,627,672 Vanguard Retirement Savings Trust II Fund 78,355,296 Vanguard Institutional Index Fund 65,230,501 December 31, 2000 IKON Office Solutions, Inc. Common Stock Fund $ 64,747,200 American Funds Group EuroPacific Growth Fund 19,029,989 PBHG Growth Fund 39,372,913 Vanguard Investment Contract Trust 58,002,978 Vanguard Institutional Index Fund 69,432,601 -7- IKON Office Solutions, Inc. Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 -------------------------------------------------------------------------------- During the years ended December 31, 2001 and 2000, the Plan's investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
2001 2000 Registered investment companies $ (20,446,561) $ (27,249,337) Common stock 254,458,105 (88,931,184) ----------------- ------------------ $234,011,544 $(116,180,521) ================= ==================
4. Nonparticipant-Directed Investments Employer matching contributions are made in IKON common stock invested in the IKON Office Solutions, Inc. Common Stock Fund. Employer matching contributions are non-participant directed and may not be redirected to the other available investment options by the participants until the attainment of age 55. Information about significant components of the changes in net assets of the IKON Office Solutions, Inc. Common Stock Fund is as follows:
2001 2000 Changes in net assets: Net appreciation (depreciation) in fair value of investments $254,458,105 $(88,931,184) Dividends 4,636,138 3,350,182 Contributions 38,935,291 48,302,278 Payment of benefits (22,243,744) (9,758,589) Administrative expenses (2,126,994) (331,290) Transfer (to) from other investment options (15,787,395) 6,601,001 ----------------- ---------------- $257,871,401 $(40,767,602) ================= ================
5. Investment Contracts with Financial Institutions, Insurance Companies and Banks At December 31, 2001 and 2000, the Vanguard Retirement Savings Trust II Fund (the "Fund") held shares of a common/collective trust sponsored by The Vanguard Group with a value of $78,355,296 and $58,002,978, respectively. Additionally, at December 31, 2000, the Fund held a guaranteed investment contract, valued at $1,301,617, and synthetic investment contracts with various banks and insurance companies ("Issuers"). The Plan is credited with earnings on the underlying investments and charged for administrative expenses by the Issuers. The investment contracts included in the Plan are carried at contract value, which approximates fair value, because the contracts are fully benefit responsive. The synthetic investment contracts constitute investments in a unit trust, an individual mortgage security, and an asset backed security, valued at $6,788,994 and wrapper contracts, valued at $(170,732). The value provided by the wrapper contracts represents the difference between the value of the synthetic investment contracts and the underlying investments. The crediting interest rates on the investment contracts ranged from 6.2% to 6.7% at December 31, 2000. The Fund held no guaranteed investment contracts or synthetic investment contracts at December 31, 2001. -8- IKON Office Solutions, Inc. Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 -------------------------------------------------------------------------------- 6. Related Party Transactions During 2001 and a portion of 2000, certain Plan investments were shares of a common/collective trust managed by Bankers Trust Company. During a portion of 2000, certain Plan investments were shares of a common/collective trust managed by The Northern Trust Company. In addition, the Plan offers an investment in the IKON Office Solutions, Inc. Common Stock fund as an investment option. The transactions in these investments are party-in-interest transactions, which are exempt from prohibited transaction rules. 7. Plan Termination Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. In the event of Plan termination, participants will become 100 percent vested in their accounts. 8. Differences Between Financial Statements and Form 5500 The following is a reconciliation of net assets available for benefits per the financial statements to the Plan's Form 5500:
2001 2000 Net assets available for benefits per the financial statements $550,672,691 $279,888,402 Amounts allocated to withdrawing participants (1,057,371) (514,488) ----------------- ----------------- Net assets available for benefits per Form 5500 $549,615,320 $279,373,914 ================= =================
The following is a reconciliation of benefits paid to participants for the year ended December 31, 2001 per the financial statements to the Form 5500:
Year Ended December 31, 2001 Benefits paid to participants per the financial statements $ 50,147,270 Add: Amounts allocated to withdrawing participants at December 31, 2001 1,057,371 Less: Amounts allocated to withdrawing participants at December 31, 2000 (514,488) ---------------- Benefits paid to participants per Form 5500 $ 50,690,153 ================
Amounts allocated to withdrawing participants are recorded on the Plan's Form 5500 for benefit claims that have been processed and approved for payment prior to December 31 but not yet paid as of that date. -9- IKON Office Solutions, Inc. Retirement Savings Plan Notes to Financial Statements December 31, 2001 and 2000 -------------------------------------------------------------------------------- 9. Tax Status The Internal Revenue Service has determined and informed the Company by a letter dated April 2, 2000, that the Plan and related trust are designed in accordance with applicable sections of the Internal Revenue Code ("IRC"). The Plan has been amended since receiving the determination letter. The Company has submitted a request for a new determination letter, which is currently pending. The Company believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC. 10. Litigation Settlement A class action lawsuit filed against the Company on behalf of the Company's shareholders was settled in 1999. During 2001, the Plan received $2,114,403 related to this settlement. The settlement was allocated proportionate to the appropriate investment accounts in 2002. Of this amount, $151,357 representing the portion related to former Unisource employees was transferred to the Georgia-Pacific 401(k) Plan in 2002. -10-
IKON Office Solutions, Inc. Retirement Savings Plan Schedule I Schedule of Assets (Held at End of Year) EIN # 230334400 Form 5500, Schedule H, Part IV, Line I December 31, 2001 ----------------------------------------------------------------------------------------------------------------------------------- Current Identity of Issue Investment Type Cost Value IKON Office Solutions, Inc. Common Stock Fund** Common Stock $ 263,621,942 $ 321,627,672 Chicago Equity Partners Small-Cap Equity Fund Registered Investment Company 4,123,455 American Funds Group EuroPacific Growth Fund Registered Investment Company 17,302,685 PBHG Growth Fund Registered Investment Company 27,296,882 PIMCO Total Return Fund Registered Investment Company 7,189,266 Vanguard Institutional Index Fund Registered Investment Company 65,230,501 Vanguard Windsor II Fund Registered Investment Company 9,213,096 Vanguard Retirement Savings Trust II Fund Common/Collective Trust 78,355,296 Pyramid Directed Cash Fund* Common/Collective Trust 6,269,803 Participant loans Interest rates ranging from 6.00% to 10.50%, maturing between January 1, 2002 and November 2, 2025 -- 14,903,960 ---------------- $ 551,512,616 ---------------- * Party-in-interest. ** Party-in-interest. Employer contributions included in this fund are nonparticipant-directed as employer matching contributions are made in IKON common stock and may not be redirected by participants to the other available investment options until the attainment of age 55. -11-
IKON Office Solutions, Inc. Retirement Savings Plan Schedule II Schedule of Reportable Transactions* EIN # 223739194 December 31, 2001 ----------------------------------------------------------------------------------------------------------------------------------- Net Description Number of Number Purchase Selling Cost of Gain or Identity of Parties Involved of Assets Purchases of Sales Price Price Asset (Loss) IKON Office Solutions, Inc.** Common Stock 152 53 $ 27,626,472 $ 24,225,542 $ 31,937,865 $(7,712,323) * Series of transactions in excess of 5% of the current value of the Plan's assets as of January 1, 2001 as defined in Section 2520.103-6 of the Department of Labor's Rules and Regulation for Reporting and Disclosure under ERISA. ** Employer contributions included in this fund are nonparticipant-directed as employer matching contributions are made in IKON common stock and may not be redirected by participants to the other available investment options until the attainment of age 55. - 12 -
SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan Administrator has duly caused this annual report to be signed by the undersigned thereunto duly authorized. IKON OFFICE SOLUTIONS, INC. RETIREMENT SAVINGS PLAN Dated: June 28, 2002 By: /s/ ALLISTER H. MCCREE, JR. --------------------------- Allister H. McCree, Jr. Plan Administrator