Ikon CEO: 1Q Service Revenue Flat At $516.9M
Thursday January 29, 12:43 pm ET
By Frank Byrt, Of DOW JONES NEWSWIRES
BOSTON (Dow Jones)--Ikon Office Solutions Inc. (NYSE:IKN - News) , which sells and services copiers and printers, Thursday reported slight declines in first-quarter performance across the board, including a 16.6% decline in earnings per share from last year, results it attributes in part to a 4.9% decline in product sales.
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Net income was $27.7 million, or 18 cents a share, compared with $32.5 million, or 21 cents a share, last year.
Analysts had expected Ikon to earn 19 cents a share, according to Thomson First Call (News - Websites) .
Revenue at $1.1 billion declined 1.8% from the first quarter last year.
Net sales, which make up 45.8% of total revenue, were at $520.5 million, down 4.9%. That includes the sale of copier and printer equipment, supplies and technology hardware. Sales of copiers and printers, which make up 75% of net sales, were flat year-over-year.
Services revenue was up less than 1%, to $516.9 million, while finance income of $99 million was up 4.3% in the first quarter
Technology-hardware sales declined by $14 million, as Ikon shifted to third- party distribution of the computer-related products. Supply sales declined by $ 13 million, impacted by lower demand for fax and other low-end supplies compared with the prior year, the company said.
Matthew Espe, Ikon's chief executive, said in a conference call with analysts this morning that second-quarter revenue is expected to be flat to up slightly year-over-year and earnings should be in the range of 19 cents to 22 cents a share.
Ikon ended the first quarter with $188 million in cash and spent $122 million on operations in the period. In the year-ago quarter, the company spent $55 million.
Capital expenditures fell to $13 million from $19 million last year.
First-quarter cash from operations and use "is in line with the company's original full-year expectations for cash from operations of $325 million to $350 million," Ikon said.
Ikon CEO Espe said the agreement to sell certain assets and liabilities of its IOS Capital unit to General Electric Corp.'s (GE) GE Vendor Financial Services unit is expected to close in the current quarter. The $1.5 billion deal was announced Dec. 11
He said the company hopes to use the proceeds to help renegotiate its existing borrowing agreement to one with less restrictive covenants for cash use.
Ikon may then consider debt reduction, share repurchases, increasing its dividend or reinvesting in its core businesses, Espe said.
Chief Financial Officer William Urkiel said the company's headcount was reduced by about 250, to 30,000 employees worldwide at the end of the quarter. That's down about 2,600 from last year.
"We can do more now with less people," due in part to technological innovations, said Urkiel. "This rate of decline is expected to slow in 2004 before it picks up again in the out years."
He said the company expects to see a continued competitive selling environment for its products in 2004 and a continued shift away from demand for low-end black-and-white printers and copiers to color products.
Sales of black-and-white products declined 13% in the quarter from last year, while color products sales were up 45%, to 40% of net sales, from about 24% last year.
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