-----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, KBpljHD/GNGTEljhRAj7v1R1KIRMXuXsVL9vC2FOI7/GO1zPJiraHssTyebtTv+X SwEg62EoCu5KyG4QRiebJQ== 0000950159-02-000458.txt : 20020731 0000950159-02-000458.hdr.sgml : 20020731 20020731170105 ACCESSION NUMBER: 0000950159-02-000458 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020724 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020731 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IOS CAPITAL LLC 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20405 FILM NUMBER: 02716422 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: IKON CAPITAL INC DATE OF NAME CHANGE: 19980113 FORMER COMPANY: FORMER CONFORMED NAME: IOS CAPITAL INC DATE OF NAME CHANGE: 19980212 FORMER COMPANY: FORMER CONFORMED NAME: ALCO CAPITAL RESOURCE INC DATE OF NAME CHANGE: 19940425 8-K 1 ioscapital-8k.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) July 24, 2002 IOS Capital, LLC (Exact name of registrant as specified in its charter) DELAWARE File No. 0-20405 23-2493042 ------------ --------------------- ------------------ (State or other (Commission File (IRS Employer jurisdiction of Number) Identification incorporation) Number) 1738 Bass Road, Macon, Georgia 31210 Registrant's telephone number, including area code: (912) 471-2300 -------------- Not Applicable ---------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. Other Events ------------ On July 24, 2002, the Registrant's parent, IKON Office Solutions, Inc. ("IKON" or the "Company"), announced results for the third quarter of fiscal year 2002. IKON's press release dated July 24, 2002 containing further detail is attached. 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 the Company's outlook for the fourth quarter and fiscal year 2002, our long-term profitability and growth opportunities, and the execution and impact of the Company's strategies. 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; 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 2001 Annual Report on Form 10-K/A 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. 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) Press Release dated July 24, 2002. 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, LLC By: /s/ HARRY KOZEE -------------------------- Harry Kozee Vice President - Finance Dated: July 31, 2002 EX-99 3 exhibit99.txt Exhibit 99 IKON REPORTS THIRD QUARTER EARNINGS UP 12% Execution and Commitment to Long-Term Strategies Yielding Intended Results Company Increases Full-Year Expectations Valley Forge, Pennsylvania - July 24, 2002 - IKON Office Solutions (NYSE: IKN), a leading provider of business communications solutions, today reported results for its third fiscal quarter ended June 30, 2002. Net income for the third quarter of Fiscal 2002 was $43.1 million, or $.28 per diluted share. These results exceeded the Company's expectations for the quarter and represent a 12% increase over $.25 per diluted share in the prior year, assuming the impact of not amortizing goodwill in accordance with SFAS 142. "Our strong earnings performance this quarter highlights the effectiveness of the revenue and operating strategies we have implemented over the last several years and our commitment to deliver significant earnings improvement in Fiscal 2002 - despite an anticipated decline in revenues," said James J. Forese, Chairman and Chief Executive Officer. "We are executing on strategies to penetrate new market opportunities, on actions to significantly improve the bottom line, and we have taken appropriate steps to ensure our financial strength. Our performance is on track and the outlook for the business remains strong. By developing IKON into a more efficient and scalable distribution and service organization, we are building value within the business and positioning the Company to take advantage of future market and business growth opportunities." Revenues for the third quarter of Fiscal 2002 were $1.22 billion, compared to $1.31 billion for the same period a year ago. While delayed customer spending continued to impact revenues generated from sales of copier/printer equipment, the Company delivered on its specific objectives for Fiscal 2002, including growth in sales of high-end production equipment, facilities management, and continued penetration into more major and national account business that leverages the Company's substantial sales and service capabilities. The Company has divested or downsized several business lines throughout Fiscal 2002, and the impact from the decline in those revenues as compared to the prior year accounted for approximately three quarters of the 7% revenue decline for the quarter. Year to date free cash flow was $139 million compared to $120 million for the same nine month period in Fiscal 2001, which excludes approximately $23 million in proceeds received in the prior year for the sale of certain real estate in the United Kingdom. The Company continues to expect to generate $220 to $230 million of free cash flow for Fiscal 2002. Excluding finance subsidiaries' debt, the Company's debt to capital ratio was 29% at June 30, 2002. Net Sales, which includes the sale of copier/printer equipment, supplies, and technology hardware, declined 7% from the prior year, led largely by a 30% decline in technology-related hardware. The Company has been de-emphasizing this low-margin revenue stream on a gradual basis, choosing instead to redirect its technical capabilities to support the growing service opportunities in document management and digital connectivity. In sales of copier/printer equipment, the Company's performance remained strong in the high-end, segment 5 & 6 market, as evidenced by double-digit growth in the sale of monochrome and production color devices. Sales of lower-end copier/printer equipment and supply sales declined compared to the prior year - a reflection of the strategies the Company has employed to shift its sales focus to more profitable and strategic product and service offerings, as well as a soft economy. Services, which primarily includes revenues from the servicing of copier/printer equipment, and outsourcing and other services, declined 9% from the prior year. The Company's significant installed equipment base continues to generate solid revenues from the servicing of copier/printer equipment, which grew slightly from the prior year as the base continues to undergo a shift from analog to digital technology, and from the Company's focus on expanding its product mix to more higher-end devices. The downsizing or sale of non-strategic outsourcing and other service businesses, including the sale of the Company's technology education business, and the sale or closure of a number of digital print centers and technology service locations, accounted for essentially all of the decline from the prior year. Strategic service offerings such as facilities management, legal document services, and professional services continued to perform well in light of current economic conditions. Finance Income grew 1% from the prior year. During the quarter, approximately 79% of IKON's customers leased through IOS Capital, IKON's captive leasing organization in North America. Effective this quarter, income generated through IOS Capital's administrative infrastructure such as syndication fees, late fees, and other processing-related revenues will be reported as Services rather than within Finance Income. There was no impact on operating income, net income or earnings per share as a result of this change. For comparative purposes, additional quarterly information has been included in the Notes to the attached financial tables. Total Gross Profit remained strong at 39.7%, unchanged versus the prior year, a result of stronger margins on Services and Finance Income, offset by reduced margins on Net Sales. Selling and Administrative Costs declined $55.2 million from the prior year through improved productivity, centralization and consolidation strategies, the downsizing or elimination of unprofitable businesses, and the elimination of approximately $10 million of goodwill amortization under SFAS 142. The Company has made significant investments to centralize and streamline its infrastructure over the years, and as a result of these strategies and in anticipation of a tough economic climate for most of Fiscal 2002, the Company set out to reduce Selling and Administrative costs by $190 million from Fiscal 2001 levels. Year to date, Selling and Administrative costs have declined by approximately $160 million compared to the first nine months of Fiscal 2001. Operating Margin was 6.8% compared to 4.9% in the third quarter a year ago, or 5.7% assuming goodwill amortization was not expensed in the third quarter of Fiscal 2001. The improvement in the operating margin reflects the Company's drive toward its long-term goal of 8% to 10% operating margins. Outlook "We are encouraged by the permanent improvements we are making to our operational infrastructure, to our revenue mix, and by the sequential improvement we are seeing in our core revenue streams," said Mr. Forese. "Although the fourth quarter is typically a softer quarter on the revenue front for IKON as compared to the third, we expect to finish out the year with a solid performance. As a result, we are raising our Fiscal 2002 expectation from earnings per diluted share of $.87 - $.92 to $.94 - $.96 for an anticipated improvement of over 16% from the prior year. This places our fourth quarter earnings expectation in the $.20 - $.22 per diluted share range. Revenues will continue to be affected by the de-emphasis of certain revenue streams, revenue mix strategies, and a cautious economic climate; therefore, revenues are expected to decline by approximately 8% for the full year, and 4% to 6% for the fourth quarter." IKON Office Solutions (www.ikon.com) is one of the world's leading providers of products and services that help businesses communicate. IKON provides customers with total business solutions for every office, production and outsourcing need, including copiers and printers, color solutions, distributed printing, facilities management, imaging and legal document solutions, as well as network design and consulting, and e-business development. IOS Capital, LLC, a wholly-owned subsidiary of IKON, provides lease financing to customers and is one of the largest captive finance companies in North America. With Fiscal 2001 revenues of $5.3 billion, IKON has approximately 600 locations worldwide including the United States, Canada, Mexico, the United Kingdom, France, Germany, Ireland and Denmark. ================================================================================ Conference Call and Website Information: Additional information regarding the third quarter results and the Company's outlook for the fourth quarter and the full fiscal year will be discussed on a conference call hosted by IKON at 9:00 a.m. EST on Wednesday, July 24, 2002. Please call (719) 867-0680 to participate. Beginning at 12:00 p.m. EST on July 24, 2002 and ending at midnight on July 28, 2002, a complete replay of the conference call can also be accessed via telephone by calling (719) 457-0820 and using the access code 770945. In addition, a complete replay of the conference call will be available over the Internet on IKON's Investor Relations homepage approximately two hours after the call ends. To listen, please go to www.ikon.com and click on Invest in IKON. ================================================================================ 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 the Company's outlook for the fourth quarter and fiscal year 2002, our long-term profitability and growth opportunities, and the execution and impact of the Company's strategies. 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; 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 2001 Annual Report on Form 10-K/A 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. # # # IKON Office Solutions, Inc. FINANCIAL SUMMARY (in thousands, except earnings per share)
Third Quarter Fiscal ------------------------------------------ 2002 2001 ------------------ ------------------ Revenues Net sales $ 598,698 $ 641,858 Services 527,204 577,741 (b) Finance income 92,714 91,558 (b) - -------------------------------------------------------------------------------------------------------- 1,218,616 1,311,157 - -------------------------------------------------------------------------------------------------------- Costs and Expenses Cost of goods sold 390,757 409,861 Services costs 304,755 338,486 (b) Finance interest expense 39,103 41,783 Selling and administrative 401,017 456,249 (b) - -------------------------------------------------------------------------------------------------------- 1,135,632 1,246,379 - -------------------------------------------------------------------------------------------------------- Operating income 82,984 64,778 Interest expense 12,955 18,345 - -------------------------------------------------------------------------------------------------------- Income before income taxes 70,029 46,433 Income taxes 26,887 20,431 - -------------------------------------------------------------------------------------------------------- Net income $ 43,142 $ 26,002 - -------------------------------------------------------------------------------------------------------- Basic Earnings Per Common Share $0.30 $0.18 ================== ================== Diluted Earnings Per Common Share $0.28 (a) $0.18 ================== ================== Weighted Average Common Shares Outstanding, Basic 143,867 141,546 ================== ================== Weighted Average Common Shares Outstanding, Diluted 158,595 145,431 ================== ================== Operations Analysis: Gross profit %, net sales 34.7% 36.1% Gross profit %, services 42.2% 41.4% Gross profit %, finance subsidiaries 57.8% 54.4% Total gross profit % 39.7% 39.7% Selling and administrative as a % of revenue 32.9% 34.8% Operating income as a % of revenue 6.8% 4.9%
(a) The calculation of diluted earnings per common share for the third quarter of fiscal 2002 assumes the conversion of convertible notes issued in May 2002 by IOS Capital, LLC. For purposes of diluted earnings per common share, net income for the third quarter of fiscal 2002 includes the add-back of interest expense, net of taxes, associated with such convertible notes. (b) The following revenue and expense amounts have been reclassified to conform with current year presentation. There was no impact on operating income, net income or earnings per share on any quarter as a result of the reclassifications. The following table summarizes the effect of the reclassifications: Revenue* Expense** --------------- --------------- Quarter ended December 31, 2000 $5,778 $590 Quarter ended March 31, 2001 $6,282 $592 Quarter ended June 30, 2001 $6,079 $631 Quarter ended September 30, 2001 $5,834 $568 Quarter ended December 31, 2001 $5,407 $699 Quarter ended March 31, 2002 $5,632 $607 Quarter ended June 30, 2002 $4,894 $676 * Amounts that have been reclassifed from Finance Income to Services Revenue. ** Amounts that have been reclassifed from Selling and Administrative Expenses to Services Costs. IKON Office Solutions, Inc. FINANCIAL SUMMARY (in thousands, except earnings per share)
Year to Date Fiscal ----------------------------------------- 2002 2001 ----------------- ------------------ Revenues Net sales $ 1,759,136 $ 2,001,648 Services 1,610,611 1,721,934 (b) Finance income 279,492 266,852 (b) - ------------------------------------------------------------------------------------------------------- 3,649,239 3,990,434 - ------------------------------------------------------------------------------------------------------- Costs and Expenses Cost of goods sold 1,155,784 1,305,473 Services costs 955,169 1,030,613 (b) Finance interest expense 117,263 132,350 Selling and administrative 1,202,562 1,362,578 (b) - ------------------------------------------------------------------------------------------------------- 3,430,778 3,831,014 - ------------------------------------------------------------------------------------------------------- Operating income 218,461 159,420 Interest expense 41,551 54,222 - ------------------------------------------------------------------------------------------------------- Income from continuing operations before income taxes 176,910 105,198 Income taxes 65,899 46,287 - ------------------------------------------------------------------------------------------------------- Income from continuing operations 111,011 58,911 Discontinued operations, net of income taxes of $942 1,200 - ------------------------------------------------------------------------------------------------------- Net income $ 111,011 $ 60,111 ================= ================== Basic Earnings Per Common Share Continuing operations $0.78 $0.41 Discontinued operations $0.01 ----------------- ------------------ Net income $0.78 $0.42 ================= ================== Diluted Earnings Per Common Share Continuing operations $0.74 $0.41 Discontinued operations $0.01 ----------------- ------------------ Net income $0.74 (a) $0.42 ================= ================== Weighted Average Common Shares Outstanding, Basic 142,901 142,121 ================= ================== Weighted Average Common Shares Outstanding, Diluted 150,918 143,982 ================= ================== Operations Analysis: Gross profit %, net sales 34.3% 34.8% Gross profit %, services 40.7% 40.1% Gross profit %, finance subsidiaries 58.0% 50.4% Total gross profit % 38.9% 38.1% Selling and administrative as a % of revenue 33.0% 34.1% Operating income as a % of revenue 6.0% 4.0%
(a) The calculation of diluted earnings per common share for fiscal 2002 assumes the conversion of convertible notes issued in May 2002 by IOS Capital, LLC. For purposes of diluted earnings per common share, net income in fiscal 2002 includes the add-back of interest expense, net of taxes, associated with such convertible notes. (b) The following revenue and expense amounts have been reclassified to conform with current year presentation. There was no impact on operating income, net income or earnings per share as a result of the reclassifications. The following table summarizes the effect of the reclassifications: Revenue* Expense** ----------------- --------------- Nine Months ended June 30, 2001 $18,139 $1,813 Nine Months ended June 30, 2002 $15,933 $1,982 * Amounts that have been reclassifed from Finance Income to Services Revenue. ** Amounts that have been reclassifed from Selling and Administrative Expenses to Services Costs. IKON Office Solutions, Inc. FINANCIAL SUMMARY (in thousands, except earnings per share) Excluding Special Items
Year to Date Fiscal ----------------------------------------- 2002 2001 (b) ------------------ ----------------- Revenues Net sales $ 1,759,136 $ 2,001,648 Services 1,610,611 1,721,934 (c) Finance income 279,492 266,852 (c) - ------------------------------------------------------------------------------------------------------ 3,649,239 3,990,434 - ------------------------------------------------------------------------------------------------------ Costs and Expenses Cost of goods sold 1,155,784 1,305,473 Services costs 955,169 1,030,613 (c) Finance interest expense 117,263 132,350 Selling and administrative 1,202,562 1,362,578 (c) - ------------------------------------------------------------------------------------------------------ 3,430,778 3,831,014 - ------------------------------------------------------------------------------------------------------ Operating income 218,461 159,420 Interest expense 41,551 54,222 - ------------------------------------------------------------------------------------------------------ Income before income taxes 176,910 105,198 Income taxes 65,899 46,287 - ------------------------------------------------------------------------------------------------------ Net income $ 111,011 $ 58,911 ================== ================= Basic Earnings Per Common Share $0.78 $0.41 ================== ================= Diluted Earnings Per Common Share $0.74 (a) $0.41 ================== ================= Weighted Average Common Shares Outstanding, Basic 142,901 142,121 ================== ================= Weighted Average Common Shares Outstanding, Diluted 150,918 143,982 ================== ================= Operations Analysis: Gross profit %, net sales 34.3% 34.8% Gross profit %, services 40.7% 40.1% Gross profit %, finance subsidiaries 58.0% 50.4% Total gross profit % 38.9% 38.1% Selling and administrative as a % of revenue 33.0% 34.1% Operating income as a % of revenue 6.0% 4.0%
(a) The calculation of diluted earnings per common share for fiscal 2002 assumes the conversion of convertible notes issued in May 2002 by IOS Capital, LLC. For purposes of diluted earnings per common share, net income in fiscal 2002 includes the add-back of interest expense, net of taxes, associated with such convertible notes. (b) Fiscal 2001 excludes a gain from discontinued operations of $2,142 ($1,200 after-tax). (c) The following revenue and expense amounts have been reclassified to conform with current year presentation. There was no impact on operating income, net income or earnings per share as a result of the reclassifications. The following table summarizes the effect of the reclassifications: Revenue* Expense** ---------------- --------------- Nine Months ended June 30, 2001 $18,139 $1,813 Nine Months ended June 30, 2002 $15,933 $1,982 * Amounts that have been reclassifed from Finance Income to Services Revenue. **Amounts that have been reclassifed from Selling and Administrative Expenses to Services Costs. This information is provided for additional analysis and is not intended to be a presentation in accordance with generally accepted accounting principles.
Exhibit 99 IKON Office Solutions, Inc. Consolidated Balance Sheets June 30, 2002 September 30, (in millions) (unaudited) 2001 - --------------------------------------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents $ 90.2 $ 80.3 Restricted cash 135.2 128.4 Accounts receivable, less allowances of: June 30, 2002 - $17.1; September 30, 2001 - $23.5 597.8 641.0 Finance receivables, less allowances of: June 30, 2002 - $20.5; September 30, 2001 - $24.4 1,194.2 1,171.0 Inventories 326.8 299.8 Prepaid expenses and other current assets 105.6 95.4 Deferred taxes 98.5 98.7 - --------------------------------------------------------------------------------------------------------------------------------- Total current assets 2,548.3 2,514.6 - --------------------------------------------------------------------------------------------------------------------------------- Long-term finance receivables, less allowances of: June 30, 2002 - $38.1; September 30, 2001 - $45.4 2,217.8 2,176.2 Equipment on operating leases, net 92.1 71.2 Property and equipment, net 209.1 207.8 Goodwill, net 1,244.1 1,258.1 Other assets 60.9 63.1 - --------------------------------------------------------------------------------------------------------------------------------- Total Assets $ 6,372.3 $ 6,291.0 - --------------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity Current portion of long-term debt $ 13.1 $ 17.6 Current portion of long-term debt, finance subsidiaries 1,065.3 1,229.6 Notes payable 7.6 183.7 Trade accounts payable 221.9 223.0 Accrued salaries, wages and commissions 95.2 126.3 Deferred revenues 164.7 185.3 Other accrued expenses 278.4 299.6 - --------------------------------------------------------------------------------------------------------------------------------- Total current liabilities 1,846.2 2,265.1 - --------------------------------------------------------------------------------------------------------------------------------- Long-term debt 595.3 599.6 Long-term debt, finance subsidiaries 1,715.0 1,366.1 Deferred taxes 497.9 446.1 Other long-term liabilities 208.5 218.5 Commitments and contingencies Shareholders' Equity Common stock, no par value: authorized 300.0 shares; issued: June 30, 2002-150.0 shares; September 30, 2001-150.1 shares; outstanding: June 30, 2002-144.0 shares; September 30, 2001- 141.8 shares 1,010.5 1,012.3 Series 12 preferred stock, no par value: authorized 0.5 shares; none issued or outstanding Unearned compensation (2.4) (3.7) Retained earnings 561.8 463.1 Accumulated other comprehensive loss (37.2) (43.5) Cost of common shares in treasury: June 30, 2002-5.3 shares; September 30, 2001-7.5 shares (23.3) (32.6) - --------------------------------------------------------------------------------------------------------------------------------- Total Shareholders' Equity 1,509.4 1,395.6 - --------------------------------------------------------------------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $ 6,372.3 $ 6,291.0 - ---------------------------------------------------------------------------------------------------------------------------------
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