Valley Forge, Pennsylvania-IKON Office Solutions (NYSE: IKN) today reported results for the fourth quarter and fiscal year ended September 30, 2000. Earnings for the fourth quarter ended September 30, 2000, were $18.2 million, or $.13 per share, including a gain from discontinued operations of $.01, compared toa loss for the fourth quarter ended September 30, 1999, of $(.30) per share, including a special litigation charge of $(.45) per share. Revenues for the fourth quarter were $1.37 billion, an increase of 2.2% from the prior year. Without the negative effect of foreign currency translation, revenue growth for the quarter would have been 3.2%. Free cash flow was in excess of $200 million, which exceeded the Company's target for the year of $158 million. "The investments we have made to strengthen our field organization over the last few years are paying off and should continue to provide opportunity for IKON as the marketplace moves towards a greater focus on solutions and services," said James J. Forese, Chairman and CEO. "Compared to last year, we saw continued strength in critical areas of our base equipment business, including 10% growth in equipment revenues worldwide. Our digital equipment base continues to grow, with the placement of digital products representing 88% of total copier and printer revenues, compared to 69% a year ago. We also continue to extend our market reach toward higher-end solutions. However, during our fourth quarter, we experienced the negative impact of price pressure on equipment sales associated with current industry dynamics. "Revenues from facilities management in IKON North America exceeded our run rate objective for the year of 25% growth, largely due to synergies created between business lines as the Company focuses on greater integration of its services." Revenues from Net Sales, consisting of equipment revenues, technology related hardware, supplies and wholesale, grew 2.9% in the quarter compared to last year. The sale of equipment continued to be strong, particularly in IKON North America where revenue growth was 14% compared to last year, following similar results in the second and third quarters of this fiscal year. Consistent with the Company's strategy of moving toward higher-end solutions, placements of segment 3-6 equipment in IKON North America increased 9% from the prior year, led by the Ricoh 850 segment 5 digital copier and the Canon imageRUNNER 110, IKON's first segment 6 digital copier/printer offering. Moderating this growth was a decline in hardware revenues in technology services, due to a shift in customers' buying patterns for these products and the effects of restructuring actions announced during the fiscal year. Gross margins on Net Sales declined from the prior year, due primarily to increased price pressure in equipment sales. Service & Rentals revenues, which include equipment service, outsourcing, and technology service revenues, declined approximately 1% from the prior year. This decline reflects restructuring actions taken throughout the year to streamline the Company's document production service operations as well as to close certain under performing units providing document production services and technology services. Fourth quarter revenues were also affected by the Company's strategic shift in the service base associated with equipment sales, as well as summer seasonality. Although gross profit in equipment service was strong, gross margins in Service & Rentals overall experienced a decline due primarily to lower revenue mix from equipment service. Finance income from the Company's leasing operations showed 26% growth year over year due to the use of on-balance sheet, asset-backed securitizations to finance new growth, as well as the continued use of leasing as a flexible offering for its customers. Since the fourth quarter of last year, the percentage of equipment internally financed by IOS Capital has increased from 66% to 72%. Selling and Administrative expense as a percentage of revenues declined from the prior year, despite increased investments in selling in order to capture new market opportunities in higher-end segments, as well as training, branding, and up-front costs associated with implementing productivity initiatives. During the fourth quarter, the Company added 120 sales representatives, bringing the year to date count to 600 - well in excess of the Company's previously stated goal of 400-500. Approximately 46% of the Company's new hires have been added in the last two fiscal quarters. Fiscal 2000 Results For fiscal 2000, the Company generated net income of $29.1 million, or $.20 per share, including restructuring charges and special gains. Excluding these charges and gains, the Company generated net income of $93.1 million, or $.63 per share. This compares to fiscal 1999 net income of $92.0 million, or $.62 per share, excluding the shareholder litigation settlement charge of $(.45) per share and special gains of $.06 per share. Revenues for fiscal 2000 of $5.4 billion were essentially flat compared to the prior year, reflecting growth in focused areas of investment, particularly 8% growth in the sale of office equipment worldwide, less revenues associated with restructuring actions of approximately $100 million. During fiscal 2000, the Company has repurchased a total of 5.4 million shares under both the 1997 and 2000 stock repurchase authorizations. Commenting on the Company's full year results, Forese said, "We had a number of key initiatives and objectives for fiscal 2000 that will enhance our ability to gain market share and share of customers through expanded services. Among these were to expand sales coverage, broaden our service offerings with e-services such as Digital ExpressÆ 2000, and Virtual File RoomÅ, and the expansion of our higher-end product line. Our continued focus on the right product and service offerings and strong customer relationships will set us apart from others in the industry. Near Term Outlook "It is clear that we have been affected by competitive pressures that impact our business," Forese said. "We believe these conditions will continue into next year. Therefore, at this time, we expect our earnings for next fiscal year to be in the $.55 - $.65 per share range, based on expected revenue growth of 2-4%. We believe revenues will grow in excess of this range in our base equipment business; however, this growth will be somewhat offset by potential shifts in revenue mix as we continue to move forward with our integrated, digital solutions model. "In addition, we will continue to focus on execution and leveraging the many investments we have already made to grow this business, and we will be making additional investments that are necessary for IKON to capture shifting and growing opportunities in new spaces, such as Digital ExpressÆ 2000, expanded e-commerce implementation, and execution of our network printer offering. "IKON's strategic direction is sound. Despite industry dynamics, we are making progress and we will continue to be focused on execution," Forese said.