-----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, QG9d/1V4ahTzijQTNvHxsmF3+jXlKuo319JntoZELJ2blG8IwCJ5rCaMelgcs0c7 oOSKKa8XaICRiydbCyRnGA== 0000950159-01-500203.txt : 20010814 0000950159-01-500203.hdr.sgml : 20010814 ACCESSION NUMBER: 0000950159-01-500203 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IOS CAPITAL INC CENTRAL INDEX KEY: 0000922255 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 232493042 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20405 FILM NUMBER: 1706076 BUSINESS ADDRESS: STREET 1: 1738 BASS RD CITY: MACON STATE: GA ZIP: 31210 BUSINESS PHONE: 9124712300 MAIL ADDRESS: STREET 1: 1738 BASS RD CITY: MACON STATE: GA ZIP: 31210 FORMER COMPANY: FORMER CONFORMED NAME: ALCO CAPITAL RESOURCE INC DATE OF NAME CHANGE: 19940425 FORMER COMPANY: FORMER CONFORMED NAME: IKON CAPITAL INC DATE OF NAME CHANGE: 19980113 10-Q 1 ioscap6-01q.txt IOS CAPITAL, INC. 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, 2001 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) (478) 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 corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of August 10, 2001: Common Stock, $.01 par value per share 1,000 shares Registered Debt Outstanding of the Company and all wholly-owned affiliates $2,263,702,662 The registrant 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. INDEX IOS CAPITAL, INC. PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Consolidated Balance Sheets - June 30, 2001 (unaudited) and September 30, 2000 Consolidated Statements of Income - Three and nine months ended June 30, 2001 and 2000 (unaudited) Consolidated Statements of Cash Flows - Nine months ended June 30, 2001 and 2000 (unaudited) Notes to Condensed Consolidated Financial Statements (unaudited) 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 PART I. FINANCIAL INFORMATION Item 1: Condensed Consolidated Financial Statements
IOS CAPITAL, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share and per share amounts) June 30, September 30, 2001 2000 (unaudited) ------------------------- ----------------------- Assets Investments in leases: Financing lease receivables, net of lease default reserve of: June 30, 2001 - $56,904; September 30, 2000- $62,266 $3,249,633 $2,899,456 Less: Unearned income (533,174) (458,606) ------------------------- ----------------------- 2,716,459 2,440,850 Funded leases, net 229,024 367,389 ------------------------- ----------------------- Investments in leases, net 2,945,483 2,808,239 Cash 6,920 3,998 Restricted cash 143,963 91,914 Accounts receivable 86,458 101,689 Prepaid expenses and other assets 11,649 6,160 Leased equipment-operating rentals at cost, less accumulated depreciation of: June 30, 2001 - $45,105; September 30, 2000 - $55,595 35,658 42,993 Property and equipment at cost, less accumulated depreciation of: June 30, 2001 - $10,095; September 30, 2000 - $8,981 8,280 9,097 ------------------------- ----------------------- Total assets $3,238,411 $3,064,090 ========================= ======================= Liabilities and Shareholder's Equity Liabilities: Accounts payable and accrued expenses $80,606 $55,327 Accrued interest 5,850 15,521 Due to IKON Office Solutions, Inc. ("IKON") 173,728 22,834 Unsecured public debt 250,000 568,500 Medium term notes 82,000 - Notes payable 8,098 - Lease-backed notes 2,002,087 1,267,641 Asset securitization conduit financing 18,000 582,795 Deferred income taxes 162,310 139,626 ------------------------- ----------------------- Total liabilities 2,782,679 2,652,244 ------------------------- ----------------------- Shareholder's equity: Common Stock - $.01 par value, 1,000 shares authorized, issued, and outstanding Contributed capital 149,415 149,415 Retained earnings 322,717 262,431 Accumulated other comprehensive loss (16,400) - ------------------------- ----------------------- Total shareholder's equity 455,732 411,846 ------------------------- ----------------------- Total liabilities and shareholder's equity $3,238,411 $3,064,090 ========================= =======================
See notes to condensed consolidated financial statements.
IOS CAPITAL, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands) (unaudited) Three months ended Nine months ended June 30, June 30, ------------------------------------- ------------------------------------ 2001 2000 2001 2000 ----------------- ---------------- ---------------- ---------------- Revenues: Lease finance income $81,905 $70,778 $237,652 $207,822 Rental income 7,360 8,850 23,767 27,186 Interest on IKON income tax deferrals - 4,168 - 12,672 Other income 6,079 5,382 18,139 15,102 ----------------- ---------------- ---------------- ---------------- 95,344 89,178 279,558 262,782 ----------------- ---------------- ---------------- ---------------- Expenses: Interest 41,360 36,875 124,818 109,652 Lease default, net of recovery income 4,031 4,184 10,613 12,567 Depreciation 6,158 7,358 19,873 22,691 General and administrative 8,104 7,776 23,468 22,400 ----------------- ---------------- ---------------- ---------------- 59,653 56,193 178,772 167,310 ----------------- ---------------- ---------------- ---------------- Gain on sale of lease receivables - - - 76 ----------------- ---------------- ---------------- ---------------- Income before income taxes 35,691 32,985 100,786 95,548 Provision for income taxes 14,462 13,306 40,500 38,331 ----------------- ---------------- ---------------- ---------------- Net income $21,229 $19,679 $60,286 $57,217 ================= ================ ================ ================
See notes to condensed consolidated financial statements. IOS CAPITAL, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Nine months ended June 30, ------------------------------------ 2001 2000 --------------- --------------- Cash flows from operating activities Net income $60,286 $57,217 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,884 23,934 Deferred tax provision 17,229 14,644 Provision for lease default 15,188 14,999 Gain on sale of investment in leases - (76) Changes in operating assets and liabilities: Accounts receivable 15,231 (1,204) Prepaid expenses and other assets (5,957) 10,215 Accounts payable and accrued expenses 14,334 1,752 Accrued interest (9,671) (15,644) --------------- --------------- Net cash provided by operating activities 127,524 105,837 --------------- --------------- Cash flows from investing activities Purchases of equipment (11,996) (11,407) Proceeds from terminations of equipment 4,927 4,727 Investments in leases: Additions (1,478,162) (1,400,034) Cancellations 234,701 222,327 Collections 1,088,704 1,029,779 Lease default reserve transfer from IKON, net of deferred taxes - 44,955 Proceeds from sale of leases - 923 Repurchase of leases sold - (275,000) --------------- --------------- Net cash used in investing activities (161,826) (383,730) --------------- --------------- Cash flows from financing activities Proceeds from asset securitization conduit financing 473,000 333,000 Payments on asset securitization conduit financing (1,037,795) (250,000) Proceeds from issuance of unsecured public debt 250,000 - Payments on medium term notes (486,500) (499,350) Short-term borrowings, net of repayments 8,098 - Proceeds from issuance of lease-backed notes 1,226,761 1,194,849 Payments on lease-backed notes (495,185) (406,439) Deposit to restricted cash (52,049) (59,554) Dividend to IKON - (30,000) --------------- --------------- Net cash (used in) provided by financing activities (113,670) 282,506 --------------- --------------- (Decrease) increase in Cash and Due to IKON (147,972) 4,613 Cash and Due to IKON at beginning of period (18,836) (111,314) --------------- --------------- Cash and Due to IKON at end of period ($166,808) ($106,701) =============== ===============
See notes to condensed consolidated financial statements. IOS CAPITAL, INC. Notes to Condensed Consolidated Financial Statements (amounts in thousands) (unaudited) Note 1: Basis of Presentation The accompanying unaudited condensed consolidated financial statements of IOS Capital, Inc. (the "Company") 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 only of normal recurring adjustments) considered necessary for a fair statement of the results of the interim periods have been included. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2000. Certain prior year amounts have been reclassified to conform with the current year presentation. Note 2: Adoption of SFAS 133 The Company adopted Statement of Financial Accounting Standards (SFAS) 133, as amended by SFAS 138, "Accounting for Derivative Instruments and Hedging Activities", on October 1, 2000. SFAS 133 requires that all derivatives be recorded on the consolidated balance sheet at their fair value. Changes in the fair value of derivatives are recorded each period in earnings or Other Comprehensive Income (Loss) ("OCI") depending on the type of hedging instrument and the effectiveness of those hedges. In accordance with the transition provisions of SFAS 133, the Company recorded a cumulative loss adjustment to OCI of $3,471, after taxes, to recognize the fair value of its derivatives as of the date of adoption. All of the derivatives used by the Company as hedges are highly effective as defined by SFAS 133 because all of the critical terms of the derivatives match those of the hedged item. All of the derivatives used by the Company have been designated as cash flow hedges at the time of the adoption of SFAS 133 or at the time they were executed, if later than October 1, 2000. All derivatives are adjusted to their fair market values at the end of each quarter. Unrealized net gains and losses for cash flow hedges are recorded in OCI. As of June 30, 2001, all of the derivatives designated as hedges by the Company are interest rate swaps which qualify for evaluation using the "shortcut method" for assessing effectiveness. As such, there is an assumption of no ineffectiveness. The Company uses interest rate swaps to fix the interest rates on its variable rate classes of lease-backed notes, which results in a lower cost of capital than if the Company had issued fixed rate notes. During the nine months ended June 30, 2001, unrealized net losses totaling $16,400 after taxes were recorded in OCI, including the $3,471 cumulative effect adjustment as of October 1, 2000. Note 3: Lease-backed Notes In addition to the $1,267,641 of lease-backed notes (the "Notes") outstanding at September 30, 2000, on December 7, 2000, IKON Receivables, LLC (a consolidated affiliate of the Company) issued $634,431 of lease-backed notes (the "2000-2 Notes") under its $2,000,000 shelf registration statement filed with the Securities and Exchange Commission. The 2000-2 Notes are comprised of Class A-1 Notes totaling $193,532 and have a stated interest rate of 6.66125%, Class A-2 Notes totaling $70,193 have a stated interest rate of 6.60%, Class A-3 Notes totaling $290,800 have a variable interest rate and Class A-4 Notes totaling $79,906 have a variable interest rate. Class A-3 Notes pay an interest rate of one-month LIBOR plus 0.23% (which has been fixed at 6.475% through an interest rate swap). Class A-4 Notes pay an interest rate of one-month LIBOR plus 0.27% (which has been fixed at 6.475% through an interest rate swap). The 2000-2 Notes are collateralized by a pool of office equipment leases or contracts and related assets and the payments on the 2000-2 Notes are made from payments received on the equipment leases. The Company received $633,000 in net proceeds from the issuance of the 2000-2 Notes and used $582,795 of that amount to repay asset securitization conduit financing. Additionally, on June 28, 2001, IKON Receivables, LLC issued $595,200 of lease-backed notes (the "2001-1 Notes") under its $2,000,000 shelf registration statement filed with the Securities and Exchange Commission. The 2001-1 Notes are comprised of Class A-1 Notes totaling $168,000 and have a stated interest rate of 3.73375%, Class A-2 Notes totaling $41,000 have a stated interest rate of 4.16%, Class A-3 Notes totaling $260,000 have a variable interest rate, and Class A-4 Notes totaling $126,200 have a variable interest rate. Class A-3 Notes pay an interest rate of one-month LIBOR plus 0.23% (which has been fixed at 4.825% through an interest rate swap). Class A-4 Notes pay an interest rate of one-month LIBOR plus 0.26% (which has been fixed at 5.435% through an interest rate swap). The 2001-1 Notes are collateralized by a pool of office equipment leases or contracts and related assets and the payments on the 2001-1 Notes are made from payments received on the equipment leases. The Company received $593,761 in net proceeds from the issuance of the 2001-1 Notes and used $455,000 of that amount to repay asset securitization conduit financing. Note 4: Asset Securitization Conduit Financing On December 7, 2000, the Company repaid $582,795 of asset securitization conduit financing when it issued the 2000-2 Notes described above. On June 28, 2001, the Company repaid $455,000 of asset securitization conduit financing when it issued the 2001-1 Notes described above. For the first nine months of fiscal 2001, the Company pledged or transferred $524,216 in financing lease receivables for $473,000 in cash in connection with its revolving asset securitization conduit financings which include the March 31, 2001 transaction described below. On March 31, 2001, the Company entered into a new asset securitization conduit financing agreement. The agreement is for an initial 364-day term with certain renewal provisions and was structured as a revolving asset securitization so that as collections reduce previously pledged interests in this new pool of leases, additional leases can be pledged up to $300,000. The terms of the agreement require that the Company continue to service the lease portfolio. Under this new agreement, the Company pledged or transferred $33,299 in financing lease receivables for $28,000 in cash and a retained interest in the remainder. As of June 30, 2001, the Company had approximately $757,000 available under its revolving asset securitization conduit financing agreements. Note 5: Unsecured Public Debt On June 15, 2001, the Company issued $250,000 of unsecured public debt with an interest rate of 9.75% (10% yield including the original issue discount) which is due on June 15, 2004. Interest is paid on the unsecured public debt semi-annually beginning December 15, 2001. With the net proceeds from the issuance, the Company repaid $150,000 of 6.730% medium term notes due June 15, 2001 and will use the remainder of the proceeds for general corporate purposes. Note 6: Notes Payable On March 25, 2001, the Company signed promissory notes and pledged $7,943 of lease receivables for $7,685 of proceeds. On June 1, 2001, the Company signed promissory notes and pledged $1,061 of lease receivables for $955 of proceeds. During the third quarter of fiscal 2001, the Company repaid $542 of the promissory notes. The notes have various interest rates with maturities through December 2005. Note 7: Comprehensive Income Total comprehensive income is as follows:
Three Months Ended Nine Months Ended June 30, June 30, 2001 2000 2001 2000 ---------------- --------------- ---------------- ----------------- Net income $21,229 $19,679 $60,286 $57,217 Cumulative effect of change in accounting principle for derivatives and hedging activities (SFAS 133), net of tax (3,471) Net gain (loss) on derivative instruments, net of tax 1,597 (12,929) ---------------- --------------- ---------------- ----------------- Total comprehensive income $22,826 $19,679 $43,886 $57,217 ================ =============== ================ =================
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. All amounts are in thousands, unless otherwise noted. Three Months Ended June 30, 2001 compared with the Three Months Ended June 30, 2000 Revenues Total revenues increased by $6,166, or 6.9%, in the third quarter of fiscal 2001 compared to the third quarter of fiscal 2000. Lease finance income increased by $11,127, or 15.7%, due to the increased balance in the lease portfolio and the increased average yield of new leases funded after September 30, 2000. The lease portfolio balance increased by 7.9% from June 30, 2000 to June 30, 2001. Office equipment placed on rental by the IKON marketplaces to customers, with cancelable terms, may be purchased by the Company as an operating lease. During the third quarter of fiscal 2001, the Company's purchases of operating lease equipment were $5,233, compared to $3,538 during the third quarter of fiscal 2000. Operating leases contributed $7,360 in rental income during the third quarter of fiscal 2001, compared to $8,850 in the third quarter of fiscal 2000, as a result of the reduced balance of the operating lease portfolio. The Company and IKON agreed to terminate the interest on the IKON income tax deferrals program effective October 1, 2000. As such, interest on the IKON income tax deferrals program was $0 in the third quarter of fiscal 2001 compared to $4,168 in the third quarter of fiscal 2000. Other income consists primarily of late payment charges, interest income on restricted cash and various billing fees. Interest income on restricted cash increased $141, or 13.3%, primarily due to the increase in lease-backed note issuances in December 2000 and June 2001 compared to the prior year. The growth in other income from late payment charges and billing fees is primarily due to the increased size of the lease portfolio balance upon which these charges and fees are based. Overall, other income grew by $697, or 13.0%, in the third quarter of fiscal 2001 compared to the third quarter of fiscal 2000. Expenses Total borrowings to finance the lease portfolio in the form of loans from banks, the issuance of medium term and lease-backed notes in the public market, Due to IKON and notes payable increased by 7.78%, as of June 30, 2001 compared to June 30, 2000. The increase in borrowing needs is driven by the increase in the lease portfolio. The debt outstanding including Due to IKON was $2,533,913 at June 30, 2001 compared to $2,351,088, at June 30, 2000. The Company paid a weighted average interest rate on all borrowings of 6.74% as of June 30, 2001 compared to 6.98% as of June 30, 2000. Primarily as a result of the increased total borrowings, interest expense grew by $4,485, or 12.2%, in the third quarter of fiscal 2001 compared to the third quarter of fiscal 2000. At June 30, 2001, the Company's debt to equity ratio including amounts Due to IKON was 5.56 to 1 compared to 5.60 to 1 at June 30, 2000. Lease default, net of recovery income, has decreased by $153, or 3.7%, due to increased recoveries for the three months ended June 30, 2001 compared to the three months ended June 30, 2000. Depreciation expense on leased equipment has decreased $1,200, or 16.3%, due to the reduced balance of the operating lease portfolio. General and administrative expenses have increased by $328, or 4.2%, in the third quarter of fiscal 2001 compared to the third quarter of fiscal 2000. Overall expenses have increased $3,460, or 6.2%, for the three months ended June 30, 2001 compared to the three months ended June 30, 2000. Income Before Income Taxes Income before income taxes for the third quarter of fiscal 2001 increased by $2,706, or 8.2%, compared to the third quarter of fiscal 2000 as a result of the items above. Income Taxes Income taxes for the third quarter of fiscal 2001 increased by $1,156, or 8.7%, compared to the third quarter of fiscal 2000. The effective income tax rate was 41% for the three months ended June 30, 2001 and 40% for the three months ended June 30, 2000. The increase in income taxes is directly attributable to the increase in income before income taxes for the third quarter of fiscal 2001 as compared to the third quarter of fiscal 2000. Nine Months Ended June 30, 2001 compared with the Nine Months Ended June 30, 2000 Revenues Total revenues increased by $16,776, or 6.4%, in the first nine months of fiscal 2001 compared to the first nine months of fiscal 2000. Lease finance income increased by $29,830, or 14.4%, primarily due to the increased lease portfolio balance and the increased average yield of new leases funded after September 30, 2000. The lease portfolio increased by 4.9% from September 30, 2000 to June 30, 2001. Office equipment placed on rental by the IKON marketplaces to customers, with cancelable terms, may be purchased by the Company as an operating lease. During the first nine months of fiscal 2001, the Company's purchases of operating lease equipment were $11,996, compared to $11,407 in the first nine months of fiscal 2000. Operating leases contributed $23,767 in rental income during the first nine months of fiscal 2001, compared to $27,186 in the first nine months of fiscal 2000, due to the reduced operating lease portfolio balance. The Company and IKON agreed to terminate the interest on the IKON income tax deferrals program effective October 1, 2000. As such, interest on the IKON income tax deferrals program was $0 in the first nine months of fiscal 2001 compared to $12,672 in the first nine months of fiscal 2000. Other income consists primarily of late payment charges, interest income on restricted cash and various billing fees. Interest income on restricted cash increased $1,456, or 49.7%, primarily due to the increase in lease-backed note issuances in December 2000 and June 2001 compared to the prior year. The growth in other income from late payment charges and billing fees is primarily due to the increased size of the lease portfolio upon which these charges and fees are based. Overall, other income grew by $3,037, or 20.1%, in the first nine months of fiscal 2001 compared to the first nine months of fiscal 2000. Expenses Total borrowings to finance the lease portfolio in the form of loans from banks, the issuance of medium term and lease-backed notes in the public market, Due to IKON and notes payable increased by 7.78%, for the first nine months of fiscal 2001 compared to the first nine months of fiscal 2000. The increase in borrowing needs was driven by the increase in the lease portfolio. The debt outstanding including Due to IKON was $2,533,913 at June 30, 2001 compared to $2,351,088, at June 30, 2000. The Company paid a weighted average interest rate on all borrowings of 6.74% as of June 30, 2001 compared to 6.98% as of June 30, 2000. Primarily as a result of the increased total borrowings, interest expense grew by $15,166, or 13.8%, in the first nine months of fiscal 2001 compared to the first nine months of fiscal 2000. At June 30, 2001, the Company's debt to equity ratio including amounts Due to IKON was 5.56 to 1 compared to 5.60 to 1 at June 30, 2000. Lease default, net of recovery income, decreased by $1,954, or 15.5%, due to increased recoveries for the nine months ended June 30, 2001 compared to the nine months ended June 30, 2000. Depreciation expense on leased equipment has decreased $2,818, or 12.4%, due to the reduced balance of the operating lease portfolio. General and administrative expenses have increased by $1,068, or 4.8%, in the first nine months of fiscal 2001 compared to the first nine months of fiscal 2000. Overall expenses have increased $11,462, or 6.9%, for the nine months ended June 30, 2001 compared to the nine months ended June 30, 2000. Income Before Income Taxes Income before income taxes for the first nine months of fiscal 2001 increased by $5,238, or 5.5%, compared to the first nine months of fiscal 2000 as a result of the items above. Income Taxes Income taxes for the first nine months of fiscal 2001 increased by $2,169, or 5.7%, compared to the first nine months of fiscal 2000. The effective income tax rate was 40% for the nine months ended June 30, 2001 and 2000. The increase in income taxes is directly attributable to the increase in income before income taxes for the first nine months of fiscal 2001 as compared to the first nine months of fiscal 2000. FORWARD-LOOKING INFORMATION This Report includes or incorporates by reference information, which may constitute forward-looking statements within the meaning of the federal securities laws. Although the Company 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 Company's and/or IKON's future financial condition and results. These risks and uncertainties, which apply to both the Company and IKON, include, but are not limited to: factors which may affect the Company's ability to recoup the full amount due on the 1999-1, 1999-2, 2000-1, 2000-2 and 2001-1 Leases (such as lessee defaults or factors impeding recovery efforts); conducting operations in a competitive environment and a changing industry (which includes technical services and products that are relatively new to the industry, IKON, and to the Company); delays, difficulties, management transitions and employment issues associated with consolidations and/or changes in business operations; managing the integration of acquired businesses; existing and future vendor relationships; risks relating to currency exchange; economic, legal and political issues associated with international operations, the Company's ability to access capital and meet its debt service requirements (including sensitivity to fluctuation in interest rates); and general economic conditions. Certain additional risks and uncertainties are set forth in the Company's 2000 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 Company. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Reports on Form 8-K On May 9, 2001, the Company filed a Current Report on Form 8-K to file, under Item 5 of the Form, a statement setting forth the Company's ratio of earnings to fixed charges for the quarter ended December 31, 2000. On June 14, 2001, the Company filed a Current Report on Form 8-K to file under Item 7, certain exhibits related to the Company's issuance of $250,000,000 in unsecured public debt on June 15, 2001. 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 13, 2001 /s/ Harry G. Kozee ---------------- ------------------------ Harry G. Kozee Vice President - Finance (Chief Accounting Officer) -----END PRIVACY-ENHANCED MESSAGE-----