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IKON Releases Fourth Quarter Results

16 Nov, 2005

IKON Releases Fourth Quarter Results

IKON Office Solutions reported results for the fourth quarter and fiscal year ended September 30, 2005. Net income for the fourth quarter was $20 million. Total revenue for the fourth quarter of fiscal year 2005 was $1.1 billion, compared to $1.14 billion for the fourth quarter of fiscal year 2004, a decline of 3%.

"Our performance during the quarter confirmed that we are headed in the right direction," said Matthew J. Espe, IKON's Chairman and Chief Executive Officer. "Our momentum in both the Mid-Market and in National Accounts continued to deliver positive results. We increased placements of new digital black and white office equipment by 7%. Color equipment revenue grew 11% and color copy volume increased 48% as compared to the fourth quarter of fiscal 2004. In addition, this was our sixth consecutive quarter of record performance for placements of the IKON CPP(TM) 500, with 96% growth year over year from this important 50 page per minute production color multifunction system. These are all positive trends that we expect to continue as we begin our new fiscal year."

For the fourth quarter of fiscal year 2005, the Company reported 6% revenue growth from its North American on-site Managed Services business, and 12% growth in Professional Services from consulting, network connectivity services, document strategy assessments and software solutions.

"Within IKON Enterprise Services, our U.S. on-site Managed Services business continued to add new customer contracts and expand revenues with existing customers, and we experienced growth in all key areas of Professional Services," stated Espe. "During the quarter, our document consultants significantly increased the number of document strategy assessments performed, and sales of enabling technologies such as the IKON DocSend scanning solution. Professional Services is an important contributor to overall revenue growth and margin enhancement, as our internal analysis shows that average selling prices can be enhanced by including software, services and workflow solutions with the traditional equipment sale."

Total revenue from continuing operations for fiscal year 2005 was $4.4 billion compared to $4.6 billion in fiscal year 2004, a decline of 4%.

Fourth Quarter 2005 Financial Details

Net Sales of $516 million, which includes the sale of copier/printer multifunction equipment and supplies, decreased 4% from the fourth quarter of fiscal year 2004. Excluding de-emphasized technology hardware revenue, Net Sales decreased 3% from last year's fourth quarter. The year-over-year decrease was driven by a 2% decline in equipment revenue and the sale of the Company's operating subsidiaries in France and Mexico.

Services revenue of $564 million, which includes Customer Services revenue from the servicing of copier/printer equipment, on- and off-site Managed Services, Professional Services, rentals and other fees, was flat compared to the fourth quarter of fiscal year 2004.


"Fiscal year 2005 was a year in which we made tremendous progress by simplifying our business and positioning the Company for growth," said Espe. "We generated momentum in the Mid-Market with a renewed focus and aggressive marketing promotions. We grew our National Accounts presence and significantly increased our color equipment sales and placements of multifunction systems. In addition, we eliminated unprofitable and non-strategic businesses, reduced selling and administrative expenses, continued to buy back shares and improved our debt to capital ratio."

Espe continued, "The work completed in fiscal year 2005 positions us well for the coming year. As we expect to continue improving our operational leverage by further aligning our selling and administrative expenses with industry benchmarks for fiscal year 2006, we expect earnings per diluted share from continuing operations to range between $0.70 and $0.75, including the impact of expensing stock options. As a result of the run off of the U.S. retained leasing portfolio and the sale of the businesses previously noted in fiscal year 2005, we anticipate fiscal year 2006 total revenue to decline 3% to 4%. We will maintain our focus on targeted revenue growth and expect it to be flat to up 1%. We also anticipate cash from continuing operations to be in the range of $50 million to $100 million."

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