Valley Forge, Pennsylvania—IKON Office Solutions (NYSE: IKN) today announced that, James J. Forese, Chairman and Chief Executive Officer of IKON Office Solutions, said: "We are in the midst of a rapidly changing competitive environment. We have long recognized the shifts taking place in our market and have been positioning IKON to compete in this changing environment over the long term. Despite current marketplace pressures, we have continued to refine our solutions model by enhancing our product and service portfolio with new, market-driven offerings — including innovative equipment from leading vendors and value-added e-services like Digital Express® 2000 and Virtual File Room™. Our aim is to continue to gain market share and expand our digital customer base while at the same time making the investments necessary to address new opportunities capable of delivering long-term revenue and earnings growth. We have been, and will continue to be, committed to these actions." Commenting on the preliminary results, Forese stated: "Basically, our revised expectations reflect three aspects of our business that are each in the midst of change as IKON continues its transition toward expanded and integrated offerings for the digital environment. Our core office equipment business continued to gain market share this quarter with low double-digit revenue growth. However, increased price pressures have softened revenue growth and gross margins from our previously anticipated fourth quarter levels. "Second, service revenues related to our office equipment business declined at greater levels than the normal decline associated with summer seasonality. IKON's digital strategy has included a shift in focus toward higher-end equipment — equipment capable of producing more service revenue streams at stronger gross margins. At this stage in our transition, it appears from preliminary data that gross margins in this area are indeed improving; however, the increased volumes from our higher-end placements have taken longer than expected to realize. "Lastly, we continue to experience revenue declines and losses in our technology service operations that provide networking and integration capabilities. As previously announced, these resources are being merged into IKON North America for fiscal 2001 to make their offerings more synergistic with our long-term strategy, and we have no doubt experienced some additional disruption from those activities. “ "Our cash flow for the fourth quarter and for the fiscal year continues to be strong. In fact, we expect that we will exceed our free cash flow target for the year of $155 million, by approximately $30-50 million. In addition, our debt-to-capital ratio — excluding our leasing business — is expected to be in the 35-36% range, led by a reduction in corporate debt quarter to quarter of more than $150 million. "There is no question that this operating environment presents major ongoing challenges as players strive to adopt a true solutions platform. Customers need a solutions provider that is able to identify technological capabilities that add the most value and a solutions provider that can, as well, integrate those capabilities with their existing operations. We intend to be that solutions provider." Forese noted that over the last two years IKON has successfully transformed its sales force and service organizations, as well as its marketing, training, and recruiting programs to ensure that the Company can provide highly specialized expertise on a nationwide basis. He observed that this provides IKON with a prime competitive advantage, as customers strive for greater efficiencies through the use of digital technologies. The Company will provide additional details on its earnings and its long-term outlook when it reports financial results for the fourth quarter and fiscal 2000 on October 26. 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 outsourcing solutions, as well as network design and consulting, application development and technology training. With fiscal 1999 revenues of $5.5 billion, IKON has approximately 900 locations worldwide including the United States, Canada, Mexico, the United Kingdom, France, Germany, Ireland and Denmark.