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IKON Reports $39.3 Million profit in Q4

Thursday, October 23, 2008

Press release from the issuing company

MALVERN, Pa. (October 22, 2008) IKON Office Solutions, the world's largest independent channel for document management systems and services, today reported results for the fourth quarter and fiscal year, which ended September 30, 2008. For the fourth quarter, earnings per diluted share were $0.23, including restructuring and asset impairment charges related to the Company's Off-site Managed Services business and costs associated with the Company's pending acquisition by Ricoh Company, Ltd. Excluding these non-recurring items, earnings per diluted share were $0.31. These results were in line with the Company's previously communicated guidance including a $0.05 per share benefit from the favorable closure of a tax audit. In the fourth quarter of fiscal 2007, the Company earned $0.23 per diluted share.

Total revenue for the fourth quarter of fiscal 2008 was $1.1 billion. As reported, operating income was $39.3 million and operating income margin was 3.7 percent in the quarter. Excluding the restructuring and asset impairment charges and the acquisition-related costs totaling $12.4 million, operating income was $51.7 million and operating income margin was 4.9 percent. Interest expense, net of interest income, increased $3 million year over year to $13 million, and weighted average fully diluted shares declined 20 percent to approximately 97 million, primarily due to the financing associated with the Company's share repurchase activity in the first quarter. The Company's effective tax rate for the fourth quarter was 17 percent as reported, compared with 28 percent in the prior-year quarter, due to the favorable closure of a federal income tax audit and the expiration of certain statutes of limitations. Net income for the quarter was $22 million and included $8 million in after-tax charges from non-recurring items. Excluding these items, net income was $30 million.

For fiscal year 2008, earnings per diluted share were $0.91, including restructuring and asset impairment charges, acquisition-related costs and a loss from the early extinguishment of debt. Excluding these non-recurring items, earnings per diluted share were $1.07. In fiscal 2007, the Company earned $0.91 per diluted share.

Total revenue was $4.2 billion in fiscal 2008, essentially flat year over year, including a currency benefit of 1 percentage point. Net income for fiscal 2008 was $91.3 million and included $15.3 million in after-tax charges from non-recurring items. Excluding these items, net income was $106.6 million.

Balance Sheet and Cash Flow

The Company's cash increased $110 million in the quarter to $216 million driven by strong operating cash flow. The Company generated $272 million of cash from operations in fiscal 2008, compared with $172 million in fiscal 2007. Capital expenditures on operating leases and property and equipment, net of proceeds, totaled $45 million in fiscal 2008, compared with $53 million in fiscal 2007. As a result, free cash flow was $227 million in fiscal 2008, compared with $119 million in fiscal 2007.

The Company paid $4 million, or $0.04 per share, of dividends to shareholders during the quarter. At September 30, 2008, actual shares outstanding were approximately 95 million.

Pending Acquisition by Ricoh

On August 27, 2008, IKON announced it had entered into a definitive agreement to be acquired by Ricoh Company, Ltd. for $17.25 per share. The transaction, which was approved by the Boards of Directors of both companies, is subject to regulatory approval in the U.S., Canada and Europe, customary closing conditions and IKON shareholder approval. On October 31, 2008, IKON shareholders will vote on the pending acquisition. For more information on the proposed transaction, see the definitive proxy statement filed on October 3, 2008, which is available on the Investor Relations section of IKON's web site (www.ikon.com).

 

 

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