In Fiscal 2004, IKON took great strides toward the strategic goal of financial flexibility, transforming its capital structure and improving its debt-to-capital ratio, as it proceeded to monetize the substantial value built into its captive leasing business. This progress was enabled by a strategic alliance with GE Commercial Finance (GE) through which IKON is transitioning out of its captive leasing business in North America. Under this alliance, GE became IKON’s preferred lease source and now operates IKON’s lease financing program under the name IKON Financial ServicesSM. In addition to initial payments for leasing business assets, the five-year agreement with GE includes provisions for fees and profit sharing expected to produce more than $110 million in annual revenues for IKON, helping to replace the revenue previously generated through the captive leasing business. As part of the transition, IKON will seek to replace approximately $65 million in operating income that exits the business as the retained U.S. leasing portfolio runs off, primarily over the next two years.

From a strategic perspective, the benefits of this evolution in IKON’s business structure are compelling. The alliance with GE, a true industry leader, complements those IKON has forged with premier providers of hardware and software. IKON will enjoy a reliable stream of cash without the restrictive capital requirements of owning a leasing arm. IKON will also be able to bring greater focus to its core business, rather than seeking to drive growth in two businesses built on fundamentally different financial models. Most important, the transition unleashes value that IKON is returning to investors, through share repurchases; through dividends, which will continue to be an important part of the company’s value proposition; and through strategic growth and productivity investments in the business.