EX-99.1 2 exhibit1.htm EX-99.1 EX-99.1

Exhibit 99.1

IKON ANNOUNCES RESULTS FOR THE SECOND QUARTER OF FISCAL YEAR 2006

  •   Exceeds High End of Earnings Expectations

  •   4% Growth in Equipment Revenue

  •   9% Reduction in Selling & Administrative Expenses

Malvern, Pa. – April 27, 2006 – IKON Office Solutions (NYSE:IKN), the world’s largest independent channel for document management systems and services, today reported results for the quarter ended March 31, 2006. Net income from continuing operations for the second quarter of fiscal year 2006 was $25 million, or $0.19 per diluted share, exceeding the Company’s previously communicated EPS range of $0.16 to $0.18. Earnings per diluted share from continuing operations grew $0.14 when compared to $0.05 per diluted share for the second quarter of fiscal year 2005, and increased 56% when compared to the adjusted $0.12 per diluted share for the same period.

Total revenue for the second quarter of fiscal year 2006 was $1.08 billion, compared to $1.09 billion for the second quarter of fiscal year 2005, a decline of 1% year over year. Excluding the negative impact of currency, total revenue was flat year over year. Targeted revenue, which represents 97% of total revenue, increased 3% year over year.

“I am pleased to report that the momentum in targeted revenue and earnings growth we experienced during the first quarter continued during the second quarter,” said Matthew J. Espe, IKON’s Chairman and Chief Executive Officer. “Once again, new digital equipment placements grew in the office, production and color segments, and new digital revenue grew in production and color. Services continued to expand in the second quarter, with Professional Services revenue up by 34% and North American on-site Managed Services revenue up by 10%. Europe continued its strong performance, particularly in Germany and Denmark.”

Selling and administrative (S&A) expenses of $315 million in the quarter decreased 9%, or $33 million, compared to the second quarter of fiscal year 2005. The decline resulted from actions taken in 2005 and the Company’s continued focus on expense management. Operating margin increased to 4.7% in the quarter.

“We saw growth and improved performance in all key areas of our business,” Espe said. “In addition, we remain on track to achieve an S&A expense-to-revenue ratio below 30% for fiscal year 2006, resulting in improved operating income margin and strong EPS growth. The net result is that we exceeded the high end of our EPS range for the quarter, and our operating income margin is approaching our fiscal year 2006 goal of 5%.”

Second Quarter 2006 Financial Details
Equipment revenue of $461 million, which includes the sale of copier/printer multifunction products, increased 4% from the second quarter of fiscal year 2005. The year over year increase was driven by revenue growth in the color market and the black and white production market. Gross margin on equipment was 25.5%, down from 27.5% in the second quarter of fiscal 2005, and up sequentially from the first quarter of fiscal 2006 by over 150 basis points.

Customer Service and Supplies revenue of $361 million, which includes revenue from the servicing of copier/printer equipment and direct sales of supplies, was flat compared to the second quarter of fiscal year 2005. The positive impact from continued growth in the digital equipment base was offset by the rapid decline in the analog equipment base. Gross margin on Customer Service and Supplies increased to 42.8% from 42.0% a year ago, driven by an improvement in parts costs and a lower cost structure in North America, as well as a continued focus on cost reduction and productivity improvements.

Managed and Professional Services revenue of $185 million, which includes both on-site and off-site Managed Services, as well as Professional Services, increased 6% compared to the second quarter of fiscal year 2005. Strong revenue growth in Professional Services and North-American on-site Managed Services was offset by a revenue decline in on-site Managed Services in Europe and off-site Managed Services. Gross margin on Managed and Professional Services dropped 40 basis points to 26.5% from 26.9% a year ago, due to slightly lower on-site and off-site service margins, partially offset by improved margins in Professional Services.

Rental and Fees revenue of $43 million was flat, and gross margin decreased to 70.0% from 73.3% a year ago, due to a decline in higher-margin renewal sharing revenue on certain lease-end activities.

Other revenue of $30 million declined 56% compared to the second quarter of fiscal year 2005, primarily due to the sale of non-strategic businesses in 2005 and the continued runoff of the U.S. retained lease portfolio. On April 3, 2006, the Company announced the sale of that portfolio to General Electric Capital Corporation, effective as of April 1, 2006. As a result of the transaction, IKON will net approximately $70 million in cash after payments of related debt and taxes.

Targeted revenue includes all revenues except those categorized as “Other.” Other revenue includes finance income and revenue generated by the remaining technology services and hardware businesses. Prior to fiscal year 2006, Other revenue also included revenue from the Company’s operating subsidiaries in France and Mexico, which were sold during fiscal year 2005, and revenue from Kafevend, which was sold in the first quarter of fiscal year 2006.

Balance Sheet and Liquidity
Unrestricted cash was $312 million as of March 31, 2006, with cash flow from continuing operations totaling $77 million for the second quarter, primarily due to an increase of net income and a reduction in accounts receivable. Capital expenditures on operating rentals and property and equipment, net of proceeds, totaled $7 million for the second quarter, compared to $16 million for the second quarter of fiscal year 2005. The total debt-to-capital ratio decreased to 40% as of March 31, 2006, from 44% as of September 30, 2005.

The Company continued to repurchase shares during the quarter, buying back 2.7 million shares of outstanding common stock for approximately $36 million. IKON’s Board of Directors approved the Company’s regular quarterly cash dividend of $0.04 per common share, payable on June 10, 2006 to holders of record at the close of business on May 22, 2006.

Consistent with its balanced capital strategy objectives, IKON made a $50 million cash contribution to its U.S. pension plan on April 4, 2006. In addition, the Company plans to announce the commencement of a tender offer for the $95 million 7.25% outstanding notes due 2008. The Company expects this action to result in a significant reduction in its corporate debt balance, which stood at $676 million as of March 31, 2006.

Outlook
“Looking ahead, we remain focused on executing our long-term plan, while continuing the strong momentum we’ve generated during the first half of fiscal 2006,” Espe said.

“For the third quarter, we expect earnings per diluted share from continuing operations to range between $0.19 and $0.21, as compared to $0.17 per diluted share earned in the third quarter of fiscal year 2005. For fiscal year 2006, we expect to deliver earnings per diluted share from continuing operations at the high end of the previously communicated range of $0.70 to $0.75. These expectations include the premium from the retained portfolio sale, which is anticipated to offset the operating income that the portfolio would have generated in the second half of fiscal 2006. These expectations exclude any charges associated with the tender offer for the 2008 notes, any charges we may take to improve our business, as well as the net gain previously disclosed in the first quarter of fiscal 2006.”

About IKON
IKON Office Solutions, Inc. (www.ikon.com), the world’s largest independent channel for copier, printer and MFP technologies, delivers integrated document management solutions and systems, enabling customers worldwide to improve document workflow and increase efficiency. IKON integrates best-in-class systems from leading manufacturers, such as Canon, Ricoh, Konica Minolta, EFI and HP, and document management software from companies like Captaris, Kofax and others, to deliver tailored, high-value solutions implemented and supported by its global services organization—IKON Enterprise Services. With fiscal year 2005 revenue of $4.4 billion, IKON has approximately 26,000 employees in 450 locations throughout North America and Western Europe.

 
 
QUARTERLY EARNINGS CONFERENCE CALL: Additional information regarding the
second quarter results and the Company’s outlook for fiscal year 2006 will be
discussed on a conference call hosted by IKON at 10:00 a.m. ET on Thursday,
April 27, 2006. The live audio broadcast of the call, with slides, can be
accessed on IKON’s Investor Relations homepage or by calling (706) 679-3408
using conference ID number 7068915. A complete replay of the conference call
will also be available on IKON’s Investor Relations homepage approximately
two hours after the call ends through the next quarterly reporting period.
To listen, please go to www.ikon.com and click on Investor Relations.
Beginning at 1:00 p.m. ET on April 27, 2006 and ending at midnight ET on May
2, 2006, a complete replay of the conference call can also be accessed via
telephone by calling (706) 645-9291 or (800) 642-1687 and using the access
code 7068915.
 
NON-GAAP INFORMATION: IKON will refer to certain non-GAAP measures during
the conference call, which IKON believes provide a reasonable basis on which
to present adjusted financial information that provides investors with a
useful indication of the performance of IKON’s ongoing operations and
financial position. This adjusted financial information should not be
construed as an alternative to our reported results determined in accordance
with GAAP. A reconciliation of these non-GAAP financial measures to GAAP can
be found within the Investor Relations section of www.IKON.com.
MARK YOUR CALENDAR: IKON’s third quarter fiscal year 2006 results will be
discussed on Thursday, July 27, 2006 on a conference call hosted at 10:00
a.m. ET. More information on how to access the audio broadcast and replay
will be provided at a later date.

This news release includes information which may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements include, but are not limited to, statements relating to our expected third quarter and full year fiscal 2006 results from continuing operations, growth in targeted revenue, the impact of our sale of our U.S. retained lease portfolio, our planned tender offer for our $95 million 7.25% outstanding notes due 2008 and our ability to execute on our strategic priorities, including growth objectives, improved operating efficiency and balanced capital strategy. Although IKON believes the expectations contained in such forward-looking statements are reasonable, it can give no assurances that such expectations will prove correct. Such forward-looking statements are based upon management’s current plans or expectations and are subject to a number of risks and uncertainties, including, but not limited to: risks and uncertainties relating to conducting operations in a competitive environment and a changing industry; delays, difficulties, management transitions and employment issues associated with consolidation of, and/or changes in business operations; risks and uncertainties associated with existing or future vendor relationships; and general economic conditions. Certain additional risks and uncertainties are set forth in filings with the Securities and Exchange Commission. As a consequence of these and other risks and uncertainties, IKON’s current plans, anticipated actions and future financial condition and results may differ materially from those expressed in any forward-looking statements. This news release also refers to certain non-GAAP financial measures, which IKON believes provide a reasonable basis on which to present adjusted financial information that provides investors with a useful indication of the performance of IKON’s ongoing operations and financial position. This adjusted financial information should not be construed as an alternative to our reported results determined in accordance with GAAP. A reconciliation of these non-GAAP financial measures to GAAP can be found within the Investor Relations section of www.IKON.com.

(FIKN)
# # #

1

                                                         
    IKON Office Solutions, Inc.                                                
    Income Statement and Operational Analysis (in thousands, except earnings per share)                                
    (unaudited)                    
                    Second Quarter Fiscal        
                    2006                   2005        
 
   Revenues                                                
 
   Equipment
           $ 460,748                     $ 444,068          
 
   Customer service and supplies
             361,383                       362,752          
 
   Managed and professional services
             185,470                       174,916          
 
   Rental and fees
             43,248                       43,039          
 
   Other
             29,660                       67,498          
 
                     1,080,509                       1,092,273          
 
                                                        
 
   Cost of Revenues                                                
 
   Equipment
             343,405                       322,098          
 
   Customer service and supplies
             206,679                       210,547          
 
   Managed and professional services
             136,366                       127,844          
 
   Rental and fees
             12,975                       11,512          
 
   Other
             15,757                       38,059          
 
                     715,182                       710,060          
 
                                                        
 
   Gross Profit                                                
 
   Equipment
             117,343                       121,970          
 
   Customer service and supplies
             154,704                       152,205          
 
   Managed and professional services
             49,104                       47,072          
 
   Rental and fees
             30,273                       31,527          
 
   Other
             13,903                       29,439          
 
                     365,327                       382,213          
 
                                                        
 
   Selling and administrative             314,827                       347,541          
 
   Gain on divestiture of business             105                       1,901          
 
   Asset impairment and restructuring             17                       11,709          
 
                                                        
 
   Operating income             50,588                       24,864          
 
   Loss from early extinguishment of debt
             —                       1,734          
 
   Interest income
             2,365                       2,360          
 
   Interest expense
             13,315                       12,868          
 
                                                        
 
   Income from continuing operations before taxes on income
             39,638                       12,622          
 
   Taxes on income
             14,270                       4,873          
 
                                                        
 
   Income from continuing operations
             25,368                       7,749          
 
   Discontinued Operations:                                                
 
   Operating loss
             (51 )                     (14,339 )        
 
   Tax benefit
             21                       5,664          
 
                                                        
 
   Net loss from discontinued operations
             (30 )                     (8,675 )        
 
   Net income (loss)
           $ 25,338                     $ (926 )        
 
                                                        
 
                                                        
 
   Basic Earnings (Loss) Per Common Share                                                
 
   Continuing operations
   $         0.19             $         0.06          
 
   Discontinued operations
             0.00                       (0.06 )        
 
                                                        
 
   Net income (loss)
           $ 0.19             $         (0.01 )     (a )
 
                                                        
 
                                                        
 
   Diluted Earnings (Loss) Per Common Share                                                
 
   Continuing operations
   $         0.19             $         0.05          
 
   Discontinued operations
             0.00                       (0.06 )        
 
                                                        
 
   Net income (loss)
           $ 0.19             $         (0.01 )        
 
                                                        
 
                                                        
 
   Weighted Average Common Shares Outstanding, Basic             132,506                       140,404          
 
                                                        
 
                                                        
 
   Weighted Average Common Shares Outstanding, Diluted             134,033                       141,629          
 
                                                        
 
                                                        
 
   Operational Analysis:
                                                
 
   Gross profit %, equipment
             25.5 %                     27.5 %        
 
   Gross profit %, customer service and supplies
             42.8 %                     42.0 %        
 
   Gross profit %, managed and professional services
             26.5 %                     26.9 %        
 
   Gross profit %, rental and fees
             70.0 %                     73.3 %        
 
   Gross profit %, other
             46.9 %                     43.6 %        
 
   Total gross profit %
             33.8 %                     35.0 %        
 
   Selling and administrative as a % of revenue
             29.1 %                     31.8 %        
 
   Operating income as a % of revenue
             4.7 %                     2.3 %        
(a)   The sum of the earnings per share amounts do not equal the total due to rounding.
        

2

                                                         
    IKON Office Solutions, Inc.                        
    Income Statement and Operational Analysis (in thousands, except earnings per share)                
    (unaudited)                        
                             
            Six Months Ended March 31    
            2006           2005    
 
   Revenues                                                
 
   Equipment
           $ 885,737             $         851,481          
 
   Customer service and supplies
             732,606                       740,982          
 
   Managed and professional services
             361,852                       354,148          
 
   Rental and fees
             83,675                       86,903          
 
   Other
             59,502                       144,204          
 
                     2,123,372                       2,177,718          
 
                                                        
 
                                                        
 
   Cost of Revenues                                                
 
   Equipment
             666,648                       612,346          
 
   Customer service and supplies
             405,732                       419,356          
 
   Managed and professional services
             268,012                       262,895          
 
   Rental and fees
             25,773                       23,834          
 
   Other
             29,687                       83,600          
 
                     1,395,852                       1,402,031          
 
                                                        
 
                                                        
 
   Gross Profit                                                
 
   Equipment
             219,089                       239,135          
 
   Customer service and supplies
             326,874                       321,626          
 
   Managed and professional services
             93,840                       91,253          
 
   Rental and fees
             57,902                       63,069          
 
   Other
             29,815                       60,604          
 
                     727,520                       775,687          
 
                                                        
 
                                                        
 
   Selling and administrative             628,814                       696,449          
 
   Gain on divestiture of business             5,029                       1,901          
 
   Asset impairment and restructuring             (135 )                     11,709          
 
                                                        
 
   Operating income             103,870                       69,430          
 
                                                        
 
   Loss from early extinguishment of debt
             1,650                       1,734          
 
   Interest income
             4,936                       3,288          
 
   Interest expense
             27,113                       26,599          
 
                                                        
 
   Income from continuing operations before taxes on income
             80,043                       44,385          
 
   Taxes on income
             27,043                       15,764          
 
                                                        
 
   Income from continuing operations
             53,000                       28,621          
 
   Discontinued Operations:                                                
 
   Operating loss
             (32 )                     (16,200 )        
 
   Tax benefit
             13                       6,399          
 
                                                        
 
   Net loss from discontinued operations
             (19 )                     (9,801 )        
 
   Net income
           $ 52,981                     $ 18,820          
 
                                                        
 
                                                        
 
   Basic Earnings (Loss) Per Common Share                                                
 
   Continuing operations
   $         0.40             $         0.20          
 
   Discontinued operations
             (0.00 )                     (0.07 )        
 
                                                        
 
   Net income
           $ 0.40             $         0.13          
 
                                                        
 
                                                        
 
   Diluted Earnings (Loss) Per Common Share                                                
 
   Continuing operations
   $         0.39             $         0.20          
 
   Discontinued operations
             (0.00 )                     (0.07 )        
 
                                                        
 
   Net income
           $ 0.39       (a )   $         0.13          
 
                                                        
 
                                                        
 
   Weighted Average Common Shares Outstanding, Basic             132,827                       140,941          
 
                                                        
 
                                                        
 
   Weighted Average Common Shares Outstanding, Diluted             134,453                       142,319          
 
                                                        
 
                                                        
 
                                                        
 
   Operational Analysis:
                                                
 
   Gross profit %, equipment
             24.7 %                     28.1 %        
 
   Gross profit %, customer service and supplies
             44.6 %                     43.4 %        
 
   Gross profit %, managed and professional services
             25.9 %                     25.8 %        
 
   Gross profit %, rental and fees
             69.2 %                     72.6 %        
 
   Gross profit %, other
             50.1 %                     42.0 %        
 
   Total gross profit %
             34.3 %                     35.6 %        
 
   Selling and administrative as a % of revenue
             29.6 %                     32.0 %        
 
   Operating income as a % of revenue
             4.9 %                     3.2 %        
 
                                                        
(a)   The calculation of diluted earnings per common share for the six months ended March 31, 2006 assumes the conversion of convertible notes resulting in 389 shares. The calculation of diluted EPS for the six months ended March 31, 2005 excludes the dilution from convertible notes because the effect would be anti-dilutive. For purposes of diluted earnings per common share, net income for the six months ended March 31, 2006 includes the add-back of $88, representing interest expense, net of taxes, associated with such convertible notes.
        
 
                                                        

3

                 
IKON Office Solutions, Inc.    
Consolidated Balance Sheets    
(in thousands and unaudited)    
    March 31,   September 30,
    2006   2005
Assets
                
Cash and cash equivalents
   $ 311,653     $ 373,705  
Restricted cash
     637       18,272  
Accounts receivable, net
     643,555       678,313  
Lease receivables, net
     94,972       317,928  
Inventories
     263,238       241,470  
Prepaid expenses and other current assets
     25,288       42,660  
Deferred taxes
     55,128       55,566  
Assets held for sale
     382,223       —  
 
                
Total current assets
     1,776,694       1,727,914  
 
                
Long-term lease receivables, net
     246,442       503,281  
Equipment on operating leases, net
     79,555       101,614  
Property and equipment, net
     145,322       144,309  
Goodwill
     1,265,311       1,280,578  
Other assets
     73,312       74,123  
Total Assets
   $ 3,586,636     $ 3,831,819  
 
                
Liabilities
                
 
           $    
Current portion of corporate debt
   $ 1,309       1,137  
Current portion of non-corporate debt
     131,852       299,359  
Trade accounts payable
     202,856       211,783  
Accrued salaries, wages and commissions
     80,249       94,614  
Deferred revenues
     107,374       111,890  
Taxes payable
     77,006       79,458  
Other accrued expenses
     120,203       139,099  
Liabilities held for sale
     205,292       —  
 
                
Total current liabilities
     926,141       937,340  
 
                
Long-term corporate debt
     674,736       728,156  
Long-term non-corporate debt
     68,630       225,307  
Deferred taxes
     9,913       20,853  
Other long-term liabilities
     319,004       349,819  
Shareholders’ Equity
     1,588,212       1,570,344  
 
                
Total Liabilities and Shareholders’ Equity
   $ 3,586,636     $ 3,831,819  
 
                
                         
IKON Office Solutions, Inc.
Consolidated Statements of Cash Flows
(in thousands and unaudited)
            Six Months Ended March 31
            2006   2005
Cash Flows from Operating Activities
                        
Net income
           $ 52,981     $ 18,820  
Net loss from discontinued operations
             (19 )     (9,801 )
 
                        
Income from continuing operations
             53,000       28,621  
Additions (deductions) to reconcile net income to net cash provided by operating activities:
                
   Depreciation
     36,119       37,405  
   Amortization
     2,033       2,692  
   Gain from divestiture of business
     (5,029 )     (1,901 )
   Loss on disposal of property and equipment
     1,458       2,306  
   Provision for losses on accounts receivable
     7,288       6,931  
   Restructuring and asset impairment charges
     (135 )     11,709  
   Deferred income taxes
     (27,750 )     (66,626 )
   Provision for lease default reserves
     1,086       988  
   Stock-based compensation expense
     5,084       5,307  
   Pension expense
     21,820       21,880  
   Loss from early extinguishment of debt
     1,650       1,734  
   Changes in operating assets and liabilities, net of divestiture of businesses:
                
   (Increase) decrease in accounts receivable
     (1,418 )     37,822  
   (Increase) decrease in inventories
     (22,321 )     12,377  
   Decrease in prepaid expenses and other current assets
     14,463       17,691  
   Decrease in accounts payable, deferred revenues, and accrued expenses
     (71,419 )     (123,797 )
   Increase in taxes payable
     26,325       12,783  
   Decrease in accrued restructuring
     (1,300 )     (905 )
   Other
     140       728  
 
                        
   Net cash provided by continuing operations
     41,094       7,745  
   Net cash used in discontinued operations
     (846 )     (2,928 )
   Net cash provided by operating activities
     40,248       4,817  
 
                        
Cash Flows from Investing Activities
                        
Proceeds from the divestiture of business
             19,575       5,330  
Expenditures for property and equipment
             (18,517 )     (14,387 )
Expenditures for equipment on operating leases
             (12,211 )     (25,038 )
Proceeds from the sale of equipment on operating leases
             15,572       5,627  
Proceeds from the sale of lease receivables
             92,865       139,392  
Lease receivables — additions
             (186,542 )     (195,189 )
Lease receivables — collections
             238,495       266,079  
Other
             (1,246 )     (2,673 )
   Net cash provided by continuing operations
     147,991       179,141  
   Net cash provided by discontinued operations
     —       88  
   Net cash provided by investing activities
     147,991       179,229  
 
                        
Cash Flows from Financing Activities
                        
Short-term corporate debt repayments, net
             (30 )     (182 )
Repayment of other borrowings
             (3,754 )     (3,439 )
Proceeds from issuance of long-term corporate debt
             —       886  
Debt issuance costs
             (984 )     —  
Long-term corporate debt repayments
             (54,460 )     (104,031 )
Non-corporate debt — issuances
             7,256       16,965  
Non-corporate debt — repayments
             (134,298 )     (199,727 )
Dividends paid
             (10,614 )     (11,298 )
Decrease in restricted cash
             1,489       2,978  
Proceeds from stock option exercises
             13,758       2,743  
Tax benefit relating to stock plans
             4,997       789  
Purchase of treasury shares
             (68,975 )     (34,240 )
   Net cash used in financing activities
     (245,615 )     (328,556 )
 
                        
Effect of exchange rate changes on cash and cash equivalents
     (4,676 )     4,845  
 
                        
Net decrease in cash and cash equivalents
             (62,052 )     (139,665 )
Cash and cash equivalents at beginning of the year
             373,705       472,951  
Cash and cash equivalents at end of the period
           $ 311,653     $ 333,286  
 
                        

4

                                                                 
IKON Office Solutions, Inc.                                                        
Reconciliation of Reported to Adjusted Earnings per Diluted Share                                                        
(in millions, except per share data)                                                        
            Second Quarter Fiscal 2005
      
 
                                       Non-GAAP           2Q06
 
           Reported       Adjustments       Adjusted           Reported
 
                                                                
 
   Revenue
   $ 1,092                           $ 1,092           $ 1,081
 
   Cost and expenses
   1,067           (12 )   (a )   1,055           1,030
 
   Operating income
   25                           37           51
 
   Loss on early extinguishment of debt
   2           (2 )   (b )   —           —
 
   Interest, net
   11                           11           11
 
   Income from continuing operations before taxes on income
   13                           27           40
 
   Taxes on income
   5           4   (c )   9           14
 
   Income from continuing operations   $ 8           $ 10           $ 17           $ 25
 
                                                                
 
   Weighted Average Common Shares Outstanding, Diluted   142           18           160           134
 
   Diluted EPS - continuing operations   $ 0.05                           $ 0.12   (d )   $ 0.19
 
                                                                
 
                                                   Growth in
        
 
                                                   Adjusted/Non-GAAPEPS   56 %
 
                                                   Growth in GAAPEPS
   246 %
 
   May not add due to rounding
                                                        
(a)   Includes an $11.4 restructuring charge, a $0.3 asset impairment charge, a $2.2 real-estate charge and $0.3 charge related to the consolidation of our LDS business, a $6.7 loss on the sale of substantially all operations in Mexico, a $1.1 gain on sale of certain technology business, and a $7.5 gain from a final reconciliation with GE related to the sale of our U.S. leasing business in 2004.
                
(b)   Loss from early extinguishment of debt.
                
(c)   Tax impact from early extinguishment of debt and charges mentioned in {a}.
                
(d)   Non-GAAPEPS for the second quarter of fiscal 2005 assumes the conversion of convertible notes resulting in 18 shares, and an add-back of $2.0 to net income representing associated interest expense, net of taxes.
                

5

                                         
IKON Office Solutions, Inc.                    
Reconciliation of revenue to revenue excluding the impact of currency                    
(in thousands)                    
                                    Revenues excluding
            Revenues   Adjustments   (1)   currency impact
    Second Quarter Fiscal 2006                                
   Total Revenues
   $ 1,080,509     $ 7,061             $ 1,087,570  
   Second Quarter Fiscal 2005
                                
   Total Revenues
   $ 1,092,273                     $ 1,092,273  
 
   2Q Yr/Yr Growth                             -0.4 %
 
   (1) Impact of exchange rates                                

6