IKON
GE Vendor Financial Services
Definitive Agreement
December 11, 2003
[GRAPHICS OMITTED]
▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Chairman & CEO
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇. Vice President & CFO
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IKON Document Efficiency At Work
Investment Considerations
The following presentation includes information about IKON's financial and
business goals and strategies which constitute "forward-looking" statements
within the meaning of the federal securities laws. These forward-looking
statements include, but are not limited to, statements regarding the following:
the future benefits of a strategic relationship with GE Vendor Financial
Services, including improvements to balance sheet, strong earnings stream and
cash flows and financial flexibility; increased financing options to customers;
high standards of customer service; organic growth in core business; proceeds
from the transaction; and potential fees and profit-sharing under the Program
Agreement. Such forward-looking statements reflect the current views of IKON
with respect to future events and are subject to certain risks, uncertainties
and assumptions that could affect IKON's current plans, anticipated actions, and
future results and described in IKON's filings with the Securities and Exchange
Commission.
Certain information contained in this presentation may be noted as non-GAAP
financial information.
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Speaker
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Chairman and Chief Executive Officer
"For IKON, this alliance with GE Vendor Financial Services will give our
customers access to a world-class financing capability, complementing our best
in class technologies from industry leaders such as Canon, Ricoh, EFI and HP.
This is a strategic relationship that will substantially improve our balance
sheet; and it provides for a strong earnings stream and cash flows, while
freeing a significant amount of invested capital."
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Announcement Highlights
IKON transitions out of U.S. leasing business
Strategic alliance with GE Vendor Financial Services ("GE") for lease financing
in the U.S. and Canada
o IKON signs definitive asset purchase agreement with GE
o GE will purchase certain assets and liabilities of IOS Capital's
portfolio
o IKON to receive approximately $1.5 billion in gross proceeds
o IKON and GE will enter into a Program Agreement:
o Future lease originations through GE as preferred lease-financing
source
o IKON's financing profits substituted for fee & profit-sharing
structures
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IKON Document Efficiency At Work
All figures are based on a 9/30/03 balance sheet and are subject to change based
on the final closing date.
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Strategic Highlights
o Improved financial flexibility
o Unlocking value of the leasing business
o Financially compelling
o Fees and profit-sharing opportunities
o Gross cash proceeds of approximately $1.5 billion
o Accretive to the business
o Long-term strategic relationship
o Enhances our high-quality lease program with solid industry partner;
broader credit capabilities
o Maintain business knowledge; seamless customer transition through
high-quality Macon organization
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IKON Document Efficiency At Work
All figures are based on a 9/30/03 balance sheet and are subject to change based
on the final closing date.
5
Creating New Value
IOS Capital
o Headquartered in Macon, Georgia
o 400 employees
o $3.1 billion net lease receivable portfolio as of 9/30/03
o 251,000 contracts/423,000 assets
o Leveraged 6:1
2003 1999
----- -----
Percent of new equipment sales
leased though IOSC 81% 66%
% of portfolio on cpc contracts 57% <30%
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Well diversified portfolio- no geographic, industry, or customer concentrations
Percent of lease receivables <30 95.2% 89.5%
days aged
Annualized gross charge-offs 2.05% 2.95%
Recoveries 44.0% 35.7%
IOS Capital/GE
o World-class industry experience and expertise
o Retaining IKON special knowledge and relationships
o Broader range of credit capabilities
o Lease financing leveraged 8:1
2003 1999
----- -----
Percent of new equipment sales
leased though IOSC 81% 66%
% of portfolio on cpc contracts 57% <30%
Well diversified portfolio- no geographic, industry, or customer concentrations
Percent of lease receivables <30 95.2% 89.5%
days aged
Annualized gross charge-offs 2.05% 2.95%
Recoveries 44.0% 35.7%
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Speaker
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▇▇▇▇ ▇▇▇▇▇▇
Senior Vice President & Chief Financial Officer
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Transaction Overview
Assets and Liabilities Acquired by GE
o $1.5 billion of net assets and liabilities transferred
o GE will continue to utilize IOS Capital's facility in Macon, Georgia
o All of IOS Capital's employees will be offered employment with GE
Assets and Liabilities Retained by IKON
o IKON will assume the following assets and liabilities of IOS Capital:
o Approximately $1.4 billion of net lease receivables and $1.2 billion
of related ABS debt
o $350 million of Senior Unsecured Notes due June 2008
o $300 million of Convertible Subordinated Notes
o IKON will retain the Canadian lease assets and liabilities
Program Agreement
o GE will become IKON's preferred financing source for the U.S. and Canada
o IKON will receive a base origination fee (3%)
o IKON will receive a volume origination fee (5%) for the first five years
for providing exclusive services related to lease generation
o IKON will become GE's preferred remarketing agent for IKON equipment
o GE and IKON will share in profits relating to residual remarketing and loss
recovery
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IKON Document Efficiency At Work
All figures are based on a 9/30/03 balance sheet and are subject to change based
on the final closing date.
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Financial Highlights
Gross proceeds from the sale of assets o Approximately $1.5 billion
and transfer of debt and other liabilities o Approximately $1 billion net, after
conduit and, deferred tax payments,
and retained liquid assets
Base origination fee o 3% on funded volume
o 5 years; additional 3 or 5 year renewal option
Volume origination fee o 5% on up to $1 billion of funded
volume per year
o Initial 5 year term of the agreement
Total origination fees o Approximately $90 - $100 million in Year 1
Sharing of profits from remarketing o Approximately $10 - $20 million in Year 1
and other services o 5 years; additional 3 or 5 year renewal option
Pre-tax earnings contribution from retained assets o Approximately $90 - $100 million
over several years
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IKON Document Efficiency At Work
All figures are based on a 9/30/03 balance sheet and are subject to change
based on the final closing date.
9
Pro Forma Capitalization
IKON Consolidated
($ in millions)
Summary of current transaction
Preliminary Reclass
& Unaudited Transaction of Unsecured Pro Forma
(9/30/03) Adjustments Debt (9/30/03)
------------ ------------- ------------- ----------
(unaudited)
Cash and cash equivalents $ 360 $991 (1) $1,351
Lease receivables, net 3,576 (1,751) 1,825
Debt
Asset securitization conduits $ 514 $(514) $-
Convertible subordinated notes 300 - (300) -
Notes due June 2004 35 - (35) -
Notes due June 2008 350 - (350) -
Other notes payable 21 (21) -
Lease-backed notes 1,563 (411) 1,152
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Debt of domestic finance subsidiary 2,783 (946) (685) 1,152
Debt of foreign finance subsidiaries 226 - 226
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Debt of finance subsidiaries 3,009 (946) (685) 1,378
Non-lease financing debt 430 - 685 1,115
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Total debt $3,438 $(946) $- $2,492
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Equity 1,635 - - 1,635
Total Capitalization $5,074 $(946) $- $4,128
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Total Debt/Capital 67.8% 60.4%
Debt/Capital excluding lease-financing 20.8% 40.5%
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1. Reflects the repayment of asset securitization conduits.
All figures are based on a 9/30/03 balance sheet and are subject to change
based on the final closing date.
10
Shareholder Value
Unleash shareholder value through seven strategic priorities
Enhance growth platforms Supplier Channel Business
Integration Expansion Mix
Shift
Drive efficiencies into every e-IKON Process Asset
area of the organization Improvement Management
Improve financial flexibility Organizational Long-term Opportunity
Development ---------------------
o 2% - 5% revenue growth
o Maintain gross margins
o S&A to revenue < 30%
o 5% to 15% EPS growth
o Alternative uses of cash
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