VALLEY FORGE, Pa., Oct. 25 - IKON Office Solutions, a leading provider of business communications solutions, today reported results for its fiscal year and fourth quarter ended September 30, 2001. Fiscal 2001 Results For the full fiscal year, net income was $18.5 million or $.13 per diluted share, compared to net income of $29.1 million or $.20 per diluted share in the prior year. Revenues for Fiscal 2001 totaled $5.27 billion, a decline of 3.2% from the prior year. Excluding special charges and gains, net income for Fiscal 2001 was $76.5 million or $.53 per diluted share, compared to net income of $93.1 million or $.63 per diluted share for Fiscal 2000. The Company generated $295 million in free cash flow in Fiscal 2001, surpassing its original target and reflecting the benefits of improved working capital productivity, including better Days Sales Outstanding (DSOs) and inventory turns, as well as other cash management initiatives. "Fiscal 2001 was a year of steady progress and strategic execution for IKON,'' said James J. Forese, Chairman and Chief Executive Officer, IKON Office Solutions. "We continued to streamline our infrastructure to enhance long-term profitability, as we repositioned our revenue mix toward key growth areas and more profitable businesses. Our balance sheet remains strong with excellent cash flow, which allows us to continue to fund key areas of our business and to take advantage of future opportunities. "The rapid rate of deterioration in the economic climate in Fiscal 2001, especially in the second half of our fiscal year, was the biggest challenge facing IKON this year,'' Mr. Forese continued. "Our ongoing focus on operational improvement clearly helped us balance the tough challenges we faced throughout Fiscal 2001, and we expect these disciplines to benefit us going forward as we prepare for an equally challenging environment in Fiscal 2002. Already, we are implementing a series of aggressive actions to deliver permanent cost savings with the restructuring actions announced during the fourth quarter, and our plans for further headcount reductions for Fiscal 2002. We are taking tough and appropriate actions that complement our long-term strategy, and I am confident of IKON's future and the opportunities that lie ahead.'' Fourth Quarter Results Earnings for the fourth quarter, excluding special charges, were $17.6 million or $.12 per diluted share. This compares to earnings in the prior year, excluding a gain from discontinued operations of $.01 per diluted share, of $16.8 million or $.12 per diluted share. Revenues for the fourth quarter of Fiscal 2001 were $1.28 billion, compared to $1.37 billion for the same period in the prior year. For the fourth quarter ended September 30, 2001, the Company recorded a pretax restructuring and asset impairment charge totaling $60 million plus reserve adjustments primarily related to the exit of the Company's telephony operations of $5.3 million. The Company also recorded a $10 million tax reserve adjustment in response to recent IRS position and court decisions on the use of leveraged corporate owned life insurance programs. Including these charges, for the fourth quarter of Fiscal 2001, the Company reported a loss of $41.6 million or $.29 per diluted share. Net Sales, which include the sale of copier/printer equipment, supplies, and technology hardware, declined 11% from the prior year. Weak economic conditions that tended to delay large purchasing decisions, as well as the Company's strategic de-emphasis of low margin technology hardware, were the primary drivers of these results. Within the mix of total copier/printer sales, revenues associated with higher-end products, specifically segments 5 and 6 black & white production equipment, continued to experience significant growth in the fourth quarter. Gross profit margin on Net Sales increased substantially over the same period in Fiscal 2000 due to operational improvements, as well as decreased revenues from lower margin technology hardware. Service & Rentals, which include revenues from the servicing of copier/printer equipment, facilities management, and other services -- including digital print production, legal document services, network integration, technology education, and e-business -- declined 3% from the fourth quarter in the prior year. For the first time in over two years, equipment service revenues showed positive year-over-year comparisons, a strong performance indicator relative to the Company's strategic focus on placing high-end products and workplace solutions that leverage digital connectivity. Facilities management, IKON's primary outsourcing offering, also experienced strong growth in the quarter. Growth in these two key areas -- equipment service and facilities management -- was offset by declines in other services, which were impacted by economic as well as strategic downsizing. Gross profit margin on Service & Rentals showed a minimal decline from the prior year. Finance Income grew 9% due in part to a higher average yield on the lease portfolio compared to the fourth quarter in the prior year and the increased percentage of equipment sales leased through IOS Capital, IKON's captive leasing subsidiary, due to the leverage provided by integrated field strategies. Despite lower revenues, operating margins of 3.6% for the fourth quarter improved slightly from the prior year, excluding the impact of special charges for the fourth quarter of Fiscal 2001. While the Company considerably strengthened gross margins through revenue mix strategies and productivity enhancements, the rapid deterioration of the economic environment outpaced the broad cost-cutting and headcount reduction initiatives announced earlier in the fiscal year. The Company continues to diligently implement its productivity initiatives and has trimmed headcount by over 2,200 since the beginning of the fiscal year. The full effect from these cost saving actions will benefit future quarters. Fiscal 2002 Outlook With little indication of significant economic recovery in the next twelve months, revenues for Fiscal 2002 are anticipated to decline approximately 4% to 6%. Against this backdrop, the Company expects to deliver improved operational performance for the fiscal year with earnings per diluted share anticipated to be in the range of $.84 to $.89, reflecting the benefit of approximately $.24 per diluted share associated with the elimination of goodwill amortization in accordance with the Company's adoption of Financial Accounting Standards Board Statement No. 142 on October 1, 2001, or $.60 to $.65 per diluted share excluding any goodwill impact. "This has been a difficult year for the business community at large. IKON has met the challenges posed by the economy, by changing industry conditions, and by outside events. We continue to execute on our strategy to achieve our long-term goals,'' said Mr. Forese. "IKON has gained financial and operational strength, and we are positioned as well as or better than any company in our industry to compete effectively in our chosen markets,'' concluded Mr. Forese.