-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GJSoe+WqEFfEZdRLbghoKZUTWewbg5dKFx13mkrbWCVfhkQ9pPmXjOEaWeohOQZW rrL4KuFeaa2/9SyFxexgMQ== 0000950159-03-001024.txt : 20031212 0000950159-03-001024.hdr.sgml : 20031212 20031211180653 ACCESSION NUMBER: 0000950159-03-001024 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031211 ITEM INFORMATION: Other events ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20031212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IKON OFFICE SOLUTIONS INC CENTRAL INDEX KEY: 0000003370 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-COMPUTER & PERIPHERAL EQUIPMENT & SOFTWARE [5045] IRS NUMBER: 230334400 STATE OF INCORPORATION: OH FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05964 FILM NUMBER: 031050370 BUSINESS ADDRESS: STREET 1: PO BOX 834 CITY: VALLEY FORGE STATE: PA ZIP: 19482 BUSINESS PHONE: 6102968000 MAIL ADDRESS: STREET 1: PO BOX 834 CITY: VALLEY FORGE STATE: PA ZIP: 19482 FORMER COMPANY: FORMER CONFORMED NAME: ALCO STANDARD CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: ALCO CHEMICAL CORP DATE OF NAME CHANGE: 19680218 8-K 1 ikon8k.txt 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) December 11, 2003 IKON Office Solutions, Inc. (Exact name of registrant as specified in its charter) _____________________________________ OHIO File No. 1-5964 23-0334400 --------------- --------------- ------------- (State or other (Commission File (IRS Employer jurisdiction of Number) Identification incorporation) Number) P.O. Box 834, Valley Forge, Pennsylvania 19482 ---------------------------------------- ----- Registrant's telephone number, including area code: (610) 296-8000 --------------- Not Applicable ------------------------------------------------------ (Former name or former address, if changed since last report) Item 5. Other Events ------------ On December 11, 2003, IKON Office Solutions, Inc. ("IKON") issued a press release announcing that it had entered into a definitive agreement with General Electric Capital Corporation ("GE") pursuant to which, among other things, GE will acquire certain assets and liabilities of IKON's captive finance subsidiary, IOS Capital, LLC. A copy of this press release is furnished with this report as Exhibit 99.1. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits ------------------------------------------------------------------ Exhibit No. 99.1 Press Release dated December 11, 2003 99.2 Slides Accompanying the Web Cast Presentation dated December 11, 2003 Item 9. Regulation FD Disclosure ------------------------ IKON hosted a conference call and live webcast with slides for analysts and investors at 9:30 a.m. EST on December 11, 2003. A complete replay of the webcast will be available on IKON's Investor Relations homepage approximately two hours after the call ends for at least the next 90 days. To listen, please go to www.ikon.com, Investor Relations, and select Presentations. Beginning at 1:00 p.m. EST on December 11, 2003 and ending at midnight EST on December 13, 2003, a complete replay of the conference call can also be accessed via telephone by calling (719) 457-0820 and using the access code 636112. A copy of the slides that accompany the webcast is furnished with this report as Exhibit 99.2. In accordance with instruction number two to Form 8-K, the information in Exhibit 99.2 shall not be deemed to be "filed" for the purposes of the Exchange Act. In accordance with instruction number four to Form 8-K, the information in Exhibit 99.2 shall not be deemed to be incorporated by reference. This report includes information which may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements relating to IKON's ability to complete the proposed transaction with GE involving IOS Capital; the expected closing date of the transaction; fees and profit-sharing arrangements upon signing of the Program Agreement; expected proceeds from the transaction; future balance sheet improvements; and plans to renegotiate the credit facility. 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 statements are based upon management's current plans or expectations and are subject to a number of risks and uncertainties, including, but not limited to: risks and uncertainties relating to conducting operations in a competitive environment and a changing industry; delays, difficulties, management transitions and employment issues associated with consolidation of, and/or changes in business operations; the implementation, timing and cost of the e-IKON initiative; 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 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission. As a consequence of these and other risks and uncertainties, IKON's current plans, anticipated actions and future financial condition and results may differ materially from those expressed in any forward-looking statements. 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 OFFICE SOLUTIONS, INC. By: /s/ KATHLEEN M. BURNS ---------------------------- Kathleen M. Burns Vice President and Treasurer Dated: December 11, 2003 EX-99 3 exhibit99-1.txt EXHIBIT 99.1 IKON ANNOUNCES TRANSITION OUT OF U.S. AND CANADIAN LEASING BUSINESS IKON to Receive Approximately $1.5 Billion in Gross Cash Proceeds from GE; Significantly Improves Balance Sheet and Capital Requirements ANNOUNCES STRATEGIC ALLIANCE WITH GE VENDOR FINANCIAL SERVICES FOR LEASE FINANCING IN THE U.S. AND CANADA Valley Forge, Pennsylvania - December 11, 2003 - IKON Office Solutions, Inc. (NYSE:IKN) today announced that it has entered into a definitive agreement with GE Vendor Financial Services ("GE"), a business unit of GE Commercial Finance, that will make GE the Company's preferred lease-financing source in the U.S. and Canada. Under the definitive agreement, for approximately $1.5 billion in gross proceeds, IKON will sell certain assets and liabilities of IOS Capital, including a portion of its lease portfolio; transfer its facilities, systems and processes to GE; and have the approximately 400 IOS Capital employees offered employment by GE. In addition, IKON will enter into a Program Agreement with GE for funding or servicing of IKON's lease originations in the U.S. and Canada. Highlights of the transaction include: o IKON to receive approximately $1.5 billion in gross proceeds; o IKON significantly transforms balance sheet and future capital requirements; o GE to conduct leasing operations out of the existing IOS Capital facilities; o GE to provide funding and servicing of IKON's future lease originations in the U.S. and Canada; o The initial term of the Program Agreement will be five years; o IKON to receive a percentage fee based on all new lease originations funded by GE; o IKON to receive a monthly volume fee for the first five years for providing exclusive services related to lease generation; o IKON and GE will enter into profit-sharing agreements related to certain remarketing services provided by IKON; and, o The program will be designed to optimize IKON's existing sales, credit processes and customer servicing relationships to provide for a seamless transition for IKON's customers and employees. "This new alliance will unleash the value of IKON's high-quality leasing organization, while we simultaneously create an even more powerful, combined offering with GE Vendor Financial Services that supports our future, and mutually beneficial goals," stated Matthew J. Espe, IKON's Chairman and Chief Executive Officer. "The transaction will allow us to significantly transform our balance sheet. In addition, with the majority of our equipment sales leased by customers, this alliance will provide a strong earnings contribution with steady cash flows, allowing us to free invested capital that can now be redeployed to accelerate internal growth and return value to our shareholders. "IOS Capital has played an important role in the continued evolution of IKON's business model. Leading many of our initial centralization and process investments, IOS Capital has been an early benefactor in the value creation achieved as IKON completes its operational transformation. Lease offerings and sales tools have been effectively integrated with our sales organization that has continued to win market share, growing the percentage of equipment sales that are leased from 66% to 81% in four years and the total portfolio by over 30%, to make IOS Capital the 11th largest captive finance organization in North America. In addition, our steadfast commitment to centralization, process disciplines and customer service has shaped IOS Capital into a high-quality lease organization and the only office equipment lease organization to achieve a Select Servicer status by Standard & Poor's. As we looked to move to the next level of value creation, it was very important for us to align with a company that will deliver the same high standards of service to our customers that they have come to expect from IOS Capital. "GE is an obvious choice because of their world-class reputation as a financial services provider with a strong history of excellence that can offer our customers a broader range of credit capabilities and financial products," continued Espe. "GE's significant experience in commercial finance and equipment leasing will provide IKON greater flexibility to support our global growth initiatives. This alliance pairs two organizations that have a customer-centered vision, superior asset origination capabilities and a commitment to quality. This is an exciting time in our company's evolution; it's another step in a series of value creation actions that will benefit IKON, its customers, and our shareholders," concluded Espe. "A highly respected participant in the equipment leasing market, IKON brings to GE a quality portfolio of assets, as well as a reputation for managing a responsive and efficient leasing business," said Dan Henson, President and Chief Executive Officer of GE Vendor Financial Services. "We look forward to continuing to deliver the highest level of service and support to existing and new IKON leasing customers, and continued growth for both businesses." Asset Sale and Program Agreements - --------------------------------- Under the terms of the agreements, and subject to closing adjustments, IKON will receive gross proceeds of approximately $1.5 billion for certain assets and liabilities of IOS Capital, which include $1.9 billion of assets (including approximately $1.8 billion in net lease receivables and corresponding residuals, of which approximately $0.4 billion is supported by lease-backed notes to be transferred to GE); transfer its Macon, Georgia facilities and its systems and related processes to GE; and have the approximately 400 IOS Capital employees offered employment by GE. IKON will retain approximately $1.4 billion of IOS Capital's net lease receivables and corresponding residuals, of which approximately $1.2 billion is supported by lease-backed notes, primarily related to the two most recent asset-backed transactions. This portfolio will be serviced by GE and is expected to primarily run off over the next 24 months. IKON will retain the Canadian portfolio and assume IOS Capital's $350 million 7.25% notes due 2008 and $300 million 5% convertible notes due 2007. In addition, under the terms of the Program Agreement, GE Vendor Financial Services will become IKON's preferred lease-financing source, with IKON receiving a lease origination fee on all new lease originations provided to GE Vendor Financial Services for a five year term, with a three or five year renewal option. During the initial five year term, IKON will also receive a monthly volume fee for providing exclusive services related to lease generation, subject to a maximum aggregate fee of $253 million over the term of the agreement. For remarketing and other services provided by IKON to support GE Vendor Financial Services, IKON will receive variable rates of profit-sharing on net proceeds. Use of Proceeds - --------------- Proceeds from the transaction are intended to be used to strengthen IKON's balance sheet, improve its financial flexibility, pay transaction-related deferred taxes and for general corporate purposes. Excluding lease finance debt, the Company intends to target a debt to capital ratio in the range of 30% to 35%. In anticipation of the substantial improvement of IKON's balance sheet, continued strong cash generation and reduced capital requirements as a result of this transaction, IKON has also announced today that it intends to enter into negotiations to replace or amend its existing $300 million credit facility to increase its options for use of proceeds, including share repurchases and other strategic alternatives. Closing - ------- The transaction has been approved by both companies. The closing of the transaction is subject to execution of the definitive Program Agreement and customary conditions, including receipt of third party consents. The transaction is expected to close in the first quarter of calendar 2004. Lehman Brothers acted as IKON's exclusive financial advisor. About IKON IKON Office Solutions (www.ikon.com) integrates imaging systems and services that help businesses manage document workflow and increase efficiency. As the world's largest independent distribution channel for copier and printer technologies, IKON offers best-in-class systems from leading manufacturers such as Canon, Ricoh and Hewlett Packard and service support through its team of 7,000 service professionals worldwide. IKON also represents the industry's broadest portfolio of document management services: outsourcing and professional services, on-site copy and mailroom management, fleet management, off-site digital printing solutions, and customized workflow and imaging application development. IKON also provides lease financing services to its customers through its wholly-owned subsidiaries, including IOS Capital, LLC. With Fiscal 2003 revenues of $4.7 billion, IKON has approximately 600 locations throughout North America and Europe. IOS Capital, LLC is IKON's wholly-owned leasing subsidiary in the U.S. Created in 1987, IOS Capital services more than 100,000 customers, manages over 400,000 assets and originates approximately $1.5 billion in new financing on an annualized basis. IOS Capital has approximately 400 employees and is located in Macon, Georgia. About GE Vendor Financial Services GE Vendor Financial Services (www.vendorfinancialservices.com), a unit of GE Commercial Finance, is a global leader in developing and providing financial solutions and services to equipment manufacturers, distributors, dealers and their end users. With $26 billion in served assets worldwide, 1,200 manufacturers, 49,000 dealers & distributors and over 600,000 accounts in more than 30 countries, Vendor Financial Services helps its customers drive new business by providing superior service, a commitment to quality and the application of the latest e-commerce technology. About GE Commercial Finance GE Commercial Finance offers businesses of all sizes an array of financial services and products worldwide. With approximately $200 billion in assets and an expertise in the mid-market segment, GE Commercial Finance provides loans, operating leases, financing programs and innovative structured capital to help customers grow. A wholly owned subsidiary of the General Electric Company, GE Commercial Finance is headquartered in Stamford, Connecticut, USA. GE is a diversified services, technology and manufacturing company with operations worldwide. ================================================================================ LIVE WEBCAST/CONFERENCE CALL TODAY: IKON will host a conference call and live webcast with slides for analysts and investors today at 9:30 a.m. EST. Please call (913) 981-5520 to participate approximately ten minutes before the scheduled start time. The live webcast can be accessed on IKON's Investor Relations homepage under Calendar & Presentations. A complete replay of the webcast will also be available on IKON's Investor Relations homepage approximately two hours after the call ends for at least the next 90 days. To listen, please go to www.ikon.com, Investor Relations, and select Presentations. Beginning at 1:00 p.m. EST on December 11, 2003 and ending at midnight EST on December 13, 2003, a complete replay of the conference call can also be accessed via telephone by calling (719) 457-0820 and using the access code 636112. ================================================================================ This news release includes information which may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements relating to our IKON's ability to complete the proposed transaction with GE involving IOS Capital; the expected closing date of the transaction; fees and profit-sharing arrangements upon signing of the Program Agreement; expected proceeds from the transaction; future balance sheet improvements; and plans to renegotiate the credit facility. 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 statements are based upon management's current plans or expectations and are subject to a number of risks and uncertainties, including, but not limited to: risks and uncertainties relating to conducting operations in a competitive environment and a changing industry; delays, difficulties, management transitions and employment issues associated with consolidation of, and/or changes in business operations; the implementation, timing and cost of the e-IKON initiative; 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 2002 Annual Report on Form 10-K filed with the Securities and Exchange Commission. As a consequence of these and other risks and uncertainties, IKON's current plans, anticipated actions and future financial condition and results may differ materially from those expressed in any forward-looking statements. (GIKN) # # # EX-99 4 exhibit99-2.txt EXHIBIT 99.2 IKON GE Vendor Financial Services Definitive Agreement December 11, 2003 [GRAPHICS OMITTED] Matthew J. Espe, Chairman & CEO William S. Urkiel, Sr. Vice President & CFO - -------------------------------------------------------------------------------- IKON Document Efficiency At Work Investment Considerations The following presentation includes information about IKON's financial and business goals and strategies which constitute "forward-looking" statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements regarding the following: the future benefits of a strategic relationship with GE Vendor Financial Services, including improvements to balance sheet, strong earnings stream and cash flows and financial flexibility; increased financing options to customers; high standards of customer service; organic growth in core business; proceeds from the transaction; and potential fees and profit-sharing under the Program Agreement. Such forward-looking statements reflect the current views of IKON with respect to future events and are subject to certain risks, uncertainties and assumptions that could affect IKON's current plans, anticipated actions, and future results and described in IKON's filings with the Securities and Exchange Commission. Certain information contained in this presentation may be noted as non-GAAP financial information. - -------------------------------------------------------------------------------- IKON Document Efficiency At Work 2 Speaker [GRAPHIC OMITTED] Matthew J. Espe Chairman and Chief Executive Officer "For IKON, this alliance with GE Vendor Financial Services will give our customers access to a world-class financing capability, complementing our best in class technologies from industry leaders such as Canon, Ricoh, EFI and HP. This is a strategic relationship that will substantially improve our balance sheet; and it provides for a strong earnings stream and cash flows, while freeing a significant amount of invested capital." - -------------------------------------------------------------------------------- IKON Document Efficiency At Work 3 Announcement Highlights IKON transitions out of U.S. leasing business Strategic alliance with GE Vendor Financial Services ("GE") for lease financing in the U.S. and Canada o IKON signs definitive asset purchase agreement with GE o GE will purchase certain assets and liabilities of IOS Capital's portfolio o IKON to receive approximately $1.5 billion in gross proceeds o IKON and GE will enter into a Program Agreement: o Future lease originations through GE as preferred lease-financing source o IKON's financing profits substituted for fee & profit-sharing structures - -------------------------------------------------------------------------------- IKON Document Efficiency At Work All figures are based on a 9/30/03 balance sheet and are subject to change based on the final closing date. 4 Strategic Highlights o Improved financial flexibility o Unlocking value of the leasing business o Financially compelling o Fees and profit-sharing opportunities o Gross cash proceeds of approximately $1.5 billion o Accretive to the business o Long-term strategic relationship o Enhances our high-quality lease program with solid industry partner; broader credit capabilities o Maintain business knowledge; seamless customer transition through high-quality Macon organization - -------------------------------------------------------------------------------- IKON Document Efficiency At Work All figures are based on a 9/30/03 balance sheet and are subject to change based on the final closing date. 5 Creating New Value IOS Capital o Headquartered in Macon, Georgia o 400 employees o $3.1 billion net lease receivable portfolio as of 9/30/03 o 251,000 contracts/423,000 assets o Leveraged 6:1 2003 1999 ----- ----- Percent of new equipment sales leased though IOSC 81% 66% % of portfolio on cpc contracts 57% <30% ------------------------------ Well diversified portfolio- no geographic, industry, or customer concentrations Percent of lease receivables <30 95.2% 89.5% days aged Annualized gross charge-offs 2.05% 2.95% Recoveries 44.0% 35.7% IOS Capital/GE o World-class industry experience and expertise o Retaining IKON special knowledge and relationships o Broader range of credit capabilities o Lease financing leveraged 8:1 2003 1999 ----- ----- Percent of new equipment sales leased though IOSC 81% 66% % of portfolio on cpc contracts 57% <30% Well diversified portfolio- no geographic, industry, or customer concentrations Percent of lease receivables <30 95.2% 89.5% days aged Annualized gross charge-offs 2.05% 2.95% Recoveries 44.0% 35.7% - -------------------------------------------------------------------------------- IKON Document Efficiency At Work 6 Speaker [GRAPHIC OMITTED] Bill Urkiel Senior Vice President & Chief Financial Officer - -------------------------------------------------------------------------------- IKON Document Efficiency At Work 7 Transaction Overview Assets and Liabilities Acquired by GE o $1.5 billion of net assets and liabilities transferred o GE will continue to utilize IOS Capital's facility in Macon, Georgia o All of IOS Capital's employees will be offered employment with GE Assets and Liabilities Retained by IKON o IKON will assume the following assets and liabilities of IOS Capital: o Approximately $1.4 billion of net lease receivables and $1.2 billion of related ABS debt o $350 million of Senior Unsecured Notes due June 2008 o $300 million of Convertible Subordinated Notes o IKON will retain the Canadian lease assets and liabilities Program Agreement o GE will become IKON's preferred financing source for the U.S. and Canada o IKON will receive a base origination fee (3%) o IKON will receive a volume origination fee (5%) for the first five years for providing exclusive services related to lease generation o IKON will become GE's preferred remarketing agent for IKON equipment o GE and IKON will share in profits relating to residual remarketing and loss recovery - -------------------------------------------------------------------------------- IKON Document Efficiency At Work All figures are based on a 9/30/03 balance sheet and are subject to change based on the final closing date. 8 Financial Highlights
Gross proceeds from the sale of assets o Approximately $1.5 billion and transfer of debt and other liabilities o Approximately $1 billion net, after conduit and, deferred tax payments, and retained liquid assets Base origination fee o 3% on funded volume o 5 years; additional 3 or 5 year renewal option Volume origination fee o 5% on up to $1 billion of funded volume per year o Initial 5 year term of the agreement Total origination fees o Approximately $90 - $100 million in Year 1 Sharing of profits from remarketing o Approximately $10 - $20 million in Year 1 and other services o 5 years; additional 3 or 5 year renewal option Pre-tax earnings contribution from retained assets o Approximately $90 - $100 million over several years
- -------------------------------------------------------------------------------- IKON Document Efficiency At Work All figures are based on a 9/30/03 balance sheet and are subject to change based on the final closing date. 9 Pro Forma Capitalization IKON Consolidated ($ in millions)
Summary of current transaction Preliminary Reclass & Unaudited Transaction of Unsecured Pro Forma (9/30/03) Adjustments Debt (9/30/03) ------------ ------------- ------------- ---------- (unaudited) Cash and cash equivalents $ 360 $991 (1) $1,351 Lease receivables, net 3,576 (1,751) 1,825 Debt Asset securitization conduits $ 514 $(514) $- Convertible subordinated notes 300 - (300) - Notes due June 2004 35 - (35) - Notes due June 2008 350 - (350) - Other notes payable 21 (21) - Lease-backed notes 1,563 (411) 1,152 - ----------------------------------------------------------------------------------------------------- Debt of domestic finance subsidiary 2,783 (946) (685) 1,152 Debt of foreign finance subsidiaries 226 - 226 - ----------------------------------------------------------------------------------------------------- Debt of finance subsidiaries 3,009 (946) (685) 1,378 Non-lease financing debt 430 - 685 1,115 - ----------------------------------------------------------------------------------------------------- Total debt $3,438 $(946) $- $2,492 ===================================================================================================== Equity 1,635 - - 1,635 Total Capitalization $5,074 $(946) $- $4,128 ===================================================================================================== Total Debt/Capital 67.8% 60.4% Debt/Capital excluding lease-financing 20.8% 40.5% - ----------------------------------------------------------------------------------------------------- ____________________________ 1. Reflects the repayment of asset securitization conduits.
All figures are based on a 9/30/03 balance sheet and are subject to change based on the final closing date. 10 Shareholder Value Unleash shareholder value through seven strategic priorities Enhance growth platforms Supplier Channel Business Integration Expansion Mix Shift Drive efficiencies into every e-IKON Process Asset area of the organization Improvement Management Improve financial flexibility Organizational Long-term Opportunity Development --------------------- o 2% - 5% revenue growth o Maintain gross margins o S&A to revenue < 30% o 5% to 15% EPS growth o Alternative uses of cash - -------------------------------------------------------------------------------- IKON Document Efficiency At Work 11 -----END PRIVACY-ENHANCED MESSAGE-----