UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2008
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from          to          .
 Commission file number 1-5964
 IKON OFFICE SOLUTIONS, INC.
 (Exact name of registrant as specified in its charter)
 OHIO
    
    23-0334400(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)70 Valley Stream ParkwayMalvern, Pennsylvania
    
    19355(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code:
(610) 296-8000
  þ o
  þ o o o
  o þ




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##### 



INDEX
 Page No.CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
    
    
    3PART I  FINANCIAL INFORMATIONITEM 1. CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS  MARCH 31, 2008 AND
SEPTEMBER 30, 2007 (UNAUDITED)
    
    
    4CONSOLIDATED STATEMENTS OF INCOME  THREE AND SIX MONTHS
ENDED MARCH 31, 2008 AND 2007 (UNAUDITED)
    
    
    5CONSOLIDATED STATEMENTS OF CASH FLOWS  SIX MONTHS ENDED
MARCH 31, 2008 AND 2007 (UNAUDITED)
    
    
    6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
    
    
    7-18ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
    
    
    19-32ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    32ITEM 4. CONTROLS AND PROCEDURES
    
    
    32-33PART II  OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    34ITEM 1A. RISK FACTORS
    
    
    34ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    34ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    34ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    34-35ITEM 5. OTHER INFORMATION
    
    
    35ITEM 6. EXHIBITS
    
    
    35SIGNATURES
  2




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##### 



FORWARD-LOOKING STATEMENTS
   
    
    conducting operations in a competitive environment and a changing industry;
    
    existing or future supplier relationships;
    
    our lease program relationships with General Electric Capital Corporation (GE);
    
    our ability to execute on our strategic priorities;
    
    our One Platform Conversion and our infrastructure and productivity initiatives;
    
    new technologies;
    
    economic, legal and political issues associated with our international operations; and
    
    our ability to maintain effective internal control over financial reporting.
  3




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##### 



PART I  FINANCIAL INFORMATION
 
 Item 1. Consolidated Financial Statements
 IKON OFFICE SOLUTIONS, INC.
 
 CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
 March 31, 2008
    
    
    September 30, 2007AssetsCash and cash equivalents
    
    $
    203,042
    
    
    $
    349,237Accounts receivable, net
    
    
    577,046
    
    
    
    552,716Lease receivables, net
    
    
    81,391
    
    
    
    84,207Inventories
    
    
    268,213
    
    
    
    287,503Prepaid expenses and other current assets
    
    
    30,490
    
    
    
    35,085Income taxes receivable
    
    
    4,104
    
    
    
    Deferred taxes
    
    
    48,028
    
    
    
    48,167Total current assets
    
    
    1,212,314
    
    
    
    1,356,915Long-term lease receivables, net
    
    
    252,795
    
    
    
    251,776Equipment on operating leases, net
    
    
    62,317
    
    
    
    72,052Property and equipment, net
    
    
    150,667
    
    
    
    154,218Deferred taxes
    
    
    30,015
    
    
    
    18,144Goodwill
    
    
    1,334,523
    
    
    
    1,333,249Other assets
    
    
    93,737
    
    
    
    84,354Total Assets
    
    $
    3,136,368
    
    
    $
    3,270,708LiabilitiesCurrent portion of corporate debt
    
    $
    17,248
    
    
    $
    16,798Current portion of non-corporate debt
    
    
    59,989
    
    
    
    51,077Trade accounts payable
    
    
    241,752
    
    
    
    263,657Accrued salaries, wages and commissions
    
    
    85,724
    
    
    
    93,052Deferred revenues
    
    
    112,596
    
    
    
    109,796Income taxes payable
    
    
    
    
    
    
    15,240Other accrued expenses
    
    
    136,358
    
    
    
    129,323Total current liabilities
    
    
    653,667
    
    
    
    678,943Long-term corporate debt
    
    
    724,154
    
    
    
    576,199Long-term non-corporate debt
    
    
    180,036
    
    
    
    181,334Other long-term liabilities
    
    
    160,033
    
    
    
    128,211Commitments and contingencies (Note 10)Shareholders EquityCommon stock, no par value
    
    
    1,063,199
    
    
    
    1,058,104Retained earnings
    
    
    940,637
    
    
    
    912,974Accumulated other comprehensive income
    
    
    124,929
    
    
    
    132,189Cost of common shares in treasury
    
    
    (710,287
    )
    
    
    (397,246
    )Total Shareholders Equity
    
    
    1,418,478
    
    
    
    1,706,021Total Liabilities and Shareholders Equity
    
    $
    3,136,368
    
    
    $
    3,270,708Supplemental InformationShares of common stock authorized
    
    
    300,000
    
    
    
    300,000Shares of common stock issued
    
    
    149,310
    
    
    
    149,310Treasury stock
    
    
    55,687
    
    
    
    31,740Shares of common stock outstanding
    
    
    93,623
    
    
    
    117,570
 See
notes to consolidated financial statements.
 4




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##### 



IKON OFFICE SOLUTIONS, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share data)
 Three Months Ended
    
    
    Six Months EndedMarch 31
    
    
    March 312008
    
    
    2007
    
    
    2008
    
    
    2007RevenuesEquipment
    
    $
    454,640
    
    
    $
    453,686
    
    
    $
    847,283
    
    
    $
    869,923Customer service and supplies
    
    
    344,347
    
    
    
    345,267
    
    
    
    694,568
    
    
    
    691,237Managed and professional services
    
    
    211,057
    
    
    
    198,237
    
    
    
    416,932
    
    
    
    390,480Rental and fees
    
    
    33,521
    
    
    
    34,576
    
    
    
    64,484
    
    
    
    69,984Other
    
    
    15,635
    
    
    
    18,970
    
    
    
    33,988
    
    
    
    36,9961,059,200
    
    
    
    1,050,736
    
    
    
    2,057,255
    
    
    
    2,058,620Cost of RevenuesEquipment
    
    
    333,541
    
    
    
    337,709
    
    
    
    624,485
    
    
    
    650,093Customer service and supplies
    
    
    206,658
    
    
    
    202,691
    
    
    
    404,748
    
    
    
    396,921Managed and professional services
    
    
    151,134
    
    
    
    144,211
    
    
    
    300,288
    
    
    
    286,463Rental and fees
    
    
    7,435
    
    
    
    8,486
    
    
    
    15,133
    
    
    
    18,395Other
    
    
    9,873
    
    
    
    12,630
    
    
    
    22,147
    
    
    
    24,627708,641
    
    
    
    705,727
    
    
    
    1,366,801
    
    
    
    1,376,499Gross ProfitEquipment
    
    
    121,099
    
    
    
    115,977
    
    
    
    222,798
    
    
    
    219,830Customer service and supplies
    
    
    137,689
    
    
    
    142,576
    
    
    
    289,820
    
    
    
    294,316Managed and professional services
    
    
    59,923
    
    
    
    54,026
    
    
    
    116,644
    
    
    
    104,017Rental and fees
    
    
    26,086
    
    
    
    26,090
    
    
    
    49,351
    
    
    
    51,589Other
    
    
    5,762
    
    
    
    6,340
    
    
    
    11,841
    
    
    
    12,369350,559
    
    
    
    345,009
    
    
    
    690,454
    
    
    
    682,121Selling and administrative
    
    
    299,060
    
    
    
    293,280
    
    
    
    594,489
    
    
    
    581,417Restructuring benefit (charge)
    
    
    71
    
    
    
    
    
    
    
    (6,612
    )
    
    
    Operating income
    
    
    51,570
    
    
    
    51,729
    
    
    
    89,353
    
    
    
    100,704Interest income
    
    
    880
    
    
    
    3,039
    
    
    
    3,281
    
    
    
    6,399Interest expense
    
    
    17,041
    
    
    
    12,530
    
    
    
    30,277
    
    
    
    24,982Income before taxes on income
    
    
    35,409
    
    
    
    42,238
    
    
    
    62,357
    
    
    
    82,121Taxes on income
    
    
    12,920
    
    
    
    11,785
    
    
    
    24,895
    
    
    
    24,331Net income
    
    $
    22,489
    
    
    $
    30,453
    
    
    $
    37,462
    
    
    $
    57,790Basic Earnings Per Common Share
    
    $
    0.24
    
    
    $
    0.24
    
    
    $
    0.36
    
    
    $
    0.46Diluted Earnings Per Common Share
    
    $
    0.24
    
    
    $
    0.24
    
    
    $
    0.36
    
    
    $
    0.45Cash dividends per common share
    
    $
    0.04
    
    
    $
    0.04
    
    
    $
    0.08
    
    
    $
    0.08
 See notes to consolidated financial statements
 5




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##### 



IKON OFFICE SOLUTIONS, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
 Six Months Ended March 312008
    
    
    2007Cash Flows from Operating ActivitiesNet income
    
    $
    37,462
    
    
    $
    57,790Additions (deductions) to reconcile net income to net cash provided by (used in) operating activities:Depreciation
    
    
    36,796
    
    
    
    33,862Amortization
    
    
    517
    
    
    
    352Other non-cash items
    
    
    1,645
    
    
    
    675Loss on disposal of property and equipment
    
    
    200
    
    
    
    503Provision for losses on accounts and lease receivable
    
    
    3,842
    
    
    
    3,891Restructuring charge
    
    
    6,612
    
    
    
    Provision for deferred income taxes
    
    
    9,002
    
    
    
    7,256Stock-based compensation expense
    
    
    5,574
    
    
    
    4,980Excess tax
benefits from stock-based compensation
    
    
    (215
    )
    
    
    (1,466
    )Pension expense
    
    
    2,099
    
    
    
    1,029Changes in operating assets and liabilities:(Increase) decrease in accounts receivable
    
    
    (29,550
    )
    
    
    22,261(Increase) decrease in finance lease receivables *
    
    
    (1,970
    )
    
    
    4,249Decrease (increase) in inventories
    
    
    19,184
    
    
    
    (109,434
    )Decrease in prepaid expenses and other current assets
    
    
    4,226
    
    
    
    4,646(Decrease) increase in accounts payable
    
    
    (22,334
    )
    
    
    30,606Increase (decrease) in deferred revenue
    
    
    1,975
    
    
    
    (10,584
    )Decrease in accrued expenses
    
    
    (12,298
    )
    
    
    (49,671
    )Contributions to pension plans
    
    
    (1,926
    )
    
    
    (1,936
    )Decrease in income taxes payable
    
    
    (1,570
    )
    
    
    (6,280
    )Other
    
    
    
    
    
    
    48Net cash provided by (used in) operating activities
    
    
    59,271
    
    
    
    (7,223
    )Cash Flows from Investing ActivitiesExpenditures for property and equipment
    
    
    (17,710
    )
    
    
    (11,708
    )Expenditures for equipment on operating leases
    
    
    (11,886
    )
    
    
    (12,731
    )Proceeds from the sale of property and equipment and equipment on operating leases
    
    
    5,679
    
    
    
    4,928Proceeds from life insurance
    
    
    1,977
    
    
    
    3,805Other
    
    
    (3,467
    )
    
    
    (868
    )Net cash used in investing activities
    
    
    (25,407
    )
    
    
    (16,574
    )Cash Flows from Financing ActivitiesShort-term corporate debt borrowings, net
    
    
    
    
    
    
    1Repayment of other borrowings
    
    
    (5,790
    )
    
    
    (42
    )Debt issuance costs
    
    
    (3,915
    )
    
    
    Debt modification costs
    
    
    
    
    
    
    (15,750
    )Corporate debt   issuances
    
    
    151,780
    
    
    
    Corporate debt   repayments
    
    
    (5,933
    )
    
    
    (615
    )Non-corporate debt  issuances
    
    
    18,714
    
    
    
    4,220Non-corporate debt  repayments
    
    
    (9,849
    )
    
    
    (7,175
    )Dividends paid
    
    
    (8,386
    )
    
    
    (10,135
    )Proceeds from stock option exercises
    
    
    1,368
    
    
    
    15,244Excess tax
benefits from stock-based compensation
    
    
    215
    
    
    
    1,466Purchase of treasury shares
    
    
    (316,962
    )
    
    
    (56,115
    )Net cash used in financing activities
    
    
    (178,758
    )
    
    
    (68,901
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,301
    )
    
    
    2,111Net decrease in cash and cash equivalents
    
    
    (146,195
    )
    
    
    (90,587
    )Cash and cash equivalents at beginning of year
    
    
    349,237
    
    
    
    414,239Cash and cash equivalents at end of period
    
    $
    203,042
    
    
    $
    323,652Supplemental cash flow information:Cash paid for income taxes
    
    $
    17,390
    
    
    $
    23,676Cash paid for interest on corporate and non-corporate debt
    
    $
    28,006
    
    
    $
    27,081Non-cash investing and financing activities:Property and equipment acquired under capital leases
    
    $
    1,925
    
    
    $
    5,998
 See notes to consolidated financial statements.
 
 *
    
    See Note 14 for further discussion regarding a change in cash flow presentation relating to our
lease receivables. 6




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##### 



IKON OFFICE SOLUTIONS, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. BASIS OF PRESENTATION
    2. RECENT ACCOUNTING STANDARDS
 Disclosures about Derivative Instruments and
Hedging Activities
 Business Combinations
 7




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##### 



Noncontrolling Interests in Consolidated
Financial Statements
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
 Fair Value Measurements Effective Date of FASB Statement No. 157,
 3. ACCOUNTING FOR STOCK BASED COMPENSATION
 Stock Options
     WeightedAverageShares
    
    PriceOutstanding at September 30, 2007
    
    
    7,656
    
    
    $
    11.60Granted
    
    
    1,384
    
    
    
    12.63Exercised
    
    
    156
    
    
    
    8.75Cancelled
    
    
    525
    
    
    
    21.71Outstanding at March 31, 2008
    
    
    8,359
    
    
    $
    11.19Exercisable at March 31, 2008
    
    
    6,396
    *
    
    $
    10.51
 8




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##### 



*
    
    871 of the 6,396 options exercisable at March 31, 2008 have an exercise price that is lower than
the closing price of the Companys stock on March 31, 2008.    Three Months Ended March 31
    
    Six Months Ended March 312008
    
    2007
    
    2008
    
    2007Expected dividend yield (1)
    
    
    2.0
    %
    
    
    1.1
    %
    
    
    1.3
    %
    
    
    1.0
    %Expected volatility rate (2)
    
    
    30.9
    %
    
    
    25.3
    %
    
    
    28.8
    %
    
    
    24.7
    %Expected lives (3)
    
    5.0 years
    

    5.0 years
    

    5.0 years
    

    5.0 yearsRisk-free interest rate (4)
    
    
    2.8
    %
    
    
    4.7
    %
    
    
    3.5
    %
    
    
    4.5
    %
 
 (1)
    
    Dividend yield assumption is based on the Companys history and expectation of future
dividend payouts.(2)
    
    The expected volatility rate is determined using historical price observations at regular
intervals since April 1, 2004, which reflects our current business model by utilizing the date
at which we sold our U.S. leasing business, April 1, 2004, as the historical starting point.(3)
    
    The expected life of employee stock options is based on both historical exercise pattern and
from calculating an expected term from the option grant date to when it is
exercised.(4)
    
    Risk-free interest rate assumption is based upon the interest rates published by the Federal
Reserve for U.S. Treasury Securities with a five-year life.  Options Outstanding
    
    
    Options ExercisableWeighted-
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-Number
    
    
    Weighted-
    
    
    Average
    
    
    
    
    
    
    Number
    
    
    Weighted-
    
    
    AverageOutstanding
    
    
    Average
    
    
    Remaining
    
    
    Aggregate
    
    
    Exercisable at
    
    
    Average
    
    
    Remaining
    
    
    AggregateRange of
    
    at March 31,
    
    
    Exercise
    
    
    Contractual
    
    
    Intrinsic
    
    
    March 31,
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicExercise Prices
    
    2008
    
    
    Price
    
    
    Life
    
    
    Value
    
    
    2008
    
    
    Price
    
    
    Life
    
    
    Value$2.50 - 2.81
    
    
    235
    
    
    $
    2.51
    
    
    2.7 years
    
    $
    1,198
    
    
    
    235
    
    
    $
    2.51
    
    
    2.7 years
    
    $
    1,1982.82 - 7.16
    
    
    636
    
    
    
    5.21
    
    
    
    6.4
    
    
    
    1,521
    
    
    
    636
    
    
    
    5.21
    
    
    
    6.4
    
    
    
    1,5217.17 - 10.79
    
    
    2,346
    
    
    
    9.46
    
    
    
    5.7
    
    
    
    
    
    
    
    2,232
    
    
    
    9.50
    
    
    
    5.5
    
    
    
    10.80 - 12.56
    
    
    2,666
    
    
    
    11.10
    
    
    
    5.9
    
    
    
    
    
    
    
    2,309
    
    
    
    11.14
    
    
    
    5.7
    
    
    
    12.57 - 33.47
    
    
    2,476
    
    
    
    15.29
    
    
    
    6.9
    
    
    
    
    
    
    
    984
    
    
    
    16.65
    
    
    
    4.0
    
    
    
    8,359
    
    
    $
    11.19
    
    
    6.1 years
    
    $
    2,719
    
    
    
    6,396
    
    
    $
    10.51
    
    
    5.3 years
    
    $
    2,719
  9




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##### 



Stock Awards
    4. INCOME TAXES
      10




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##### 



5. GOODWILL
  IKON North
    
    
    IKONAmerica
    
    
    Europe
    
    
    TotalGoodwill at September 30, 2007
    
    $
    964,517
    
    
    $
    368,732
    
    
    $
    1,333,249Translation adjustment
    
    
    (406
    )
    
    
    562
    
    
    
    156Acquisitions
    
    
    449
    
    
    
    669
    
    
    
    1,118Goodwill at March 31, 2008
    
    $
    964,560
    
    
    $
    369,963
    
    
    $
    1,334,523
  6. EARNINGS PER COMMON SHARE
  Three Months Ended
    
    
    Six Months EndedMarch 31
    
    
    March 312008
    
    
    2007
    
    
    2008
    
    
    2007Numerator:Numerator for basic & diluted
earnings per common share  net
income
    
    $
    22,489
    
    
    $
    30,453
    
    
    $
    37,462
    
    
    $
    57,790Denominator:Denominator for basic
earnings per common share 
weighted average common
shares
    
    
    93,871
    
    
    
    126,329
    
    
    
    103,717
    
    
    
    126,787Effect of dilutive securities:Employee stock awards
    
    
    106
    
    
    
    706
    
    
    
    329
    
    
    
    692Employee stock options
    
    
    
    
    
    
    1,147
    
    
    
    288
    
    
    
    1,268Dilutive potential common shares
    
    
    106
    
    
    
    1,853
    
    
    
    617
    
    
    
    1,960Denominator for diluted earnings
per common share  adjusted
weighted average common shares
    
    
    93,977
    
    
    
    128,182
    
    
    
    104,334
    
    
    
    128,747Basic earnings per common share
    
    $
    0.24
    
    
    $
    0.24
    
    
    $
    0.36
    
    
    $
    0.46Diluted earnings per common share
    
    $
    0.24
    
    
    $
    0.24
    
    
    $
    0.36
    
    
    $
    0.45
     11




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##### 



7. DEBT
  Period
    
    PercentageIssue date through July 1, 2008
    
    
    100
    %July 2, 2008 through April 1, 2009
    
    
    103
    %April 2, 2009 through January 1, 2010
    
    
    102
    %After January 1, 2010
    
    
    100
    %
 8. SHARE REPURCHASES
  9. COMPREHENSIVE INCOME
  Three Months Ended
    
    
    Six Months EndedMarch 31
    
    
    March 312008
    
    
    2007
    
    
    2008
    
    
    2007Net income
    
    $
    22,489
    
    
    $
    30,453
    
    
    $
    37,462
    
    
    $
    57,790Foreign currency translation adjustments
    
    
    6,854
    
    
    
    4,917
    
    
    
    (6,708
    )
    
    
    21,484Gain (loss) on derivative financial instruments
    
    
    64
    
    
    
    
    
    
    
    (551
    )
    
    
    Total comprehensive income
    
    $
    29,407
    
    
    $
    35,370
    
    
    $
    30,203
    
    
    $
    79,274
 12




---



##### 



10. CONTINGENCIES
 Environmental and Legal
     Other Contingencies
  13




---



##### 



11. SEGMENT REPORTING
  *CorporateIKON North
    
    
    IKON
    
    
    andAmerica
    
    
    Europe
    
    
    Eliminations
    
    
    TotalThree Months Ended March 31, 2008Revenues:Equipment
    
    $
    383,592
    
    
    $
    71,048
    
    
    $
    
    
    
    $
    454,640Customer service and supplies
    
    
    294,587
    
    
    
    49,760
    
    
    
    
    
    
    
    344,347Managed and professional services
    
    
    198,523
    
    
    
    12,534
    
    
    
    
    
    
    
    211,057Rental and fees
    
    
    31,901
    
    
    
    1,620
    
    
    
    
    
    
    
    33,521Other
    
    
    
    
    
    
    15,635
    
    
    
    
    
    
    
    15,635Total revenues
    
    
    908,603
    
    
    
    150,597
    
    
    
    
    
    
    
    1,059,200Cost of Revenues:Equipment
    
    
    284,891
    
    
    
    48,650
    
    
    
    
    
    
    
    333,541Customer service and supplies
    
    
    171,084
    
    
    
    35,574
    
    
    
    
    
    
    
    206,658Managed and professional services
    
    
    139,549
    
    
    
    11,585
    
    
    
    
    
    
    
    151,134Rental and fees
    
    
    7,208
    
    
    
    227
    
    
    
    
    
    
    
    7,435Other
    
    
    
    
    
    
    9,873
    
    
    
    
    
    
    
    9,873Total cost of revenues
    
    
    602,732
    
    
    
    105,909
    
    
    
    
    
    
    
    708,641Gross Profit:Equipment
    
    
    98,701
    
    
    
    22,398
    
    
    
    
    
    
    
    121,099Customer service and supplies
    
    
    123,503
    
    
    
    14,186
    
    
    
    
    
    
    
    137,689Managed and professional services
    
    
    58,974
    
    
    
    949
    
    
    
    
    
    
    
    59,923Rental and fees
    
    
    24,693
    
    
    
    1,393
    
    
    
    
    
    
    
    26,086Other
    
    
    
    
    
    
    5,762
    
    
    
    
    
    
    
    5,762Total gross profit
    
    
    305,871
    
    
    
    44,688
    
    
    
    
    
    
    
    350,559Selling and administrative
    
    
    225,555
    
    
    
    38,034
    
    
    
    35,471
    
    
    
    299,060Restructuring benefit
    
    
    (71
    )
    
    
    
    
    
    
    
    
    
    
    (71
    )Operating income
    
    
    80,387
    
    
    
    6,654
    
    
    
    (35,471
    )
    
    
    51,570Interest income
    
    
    
    
    
    
    
    
    
    
    880
    
    
    
    880Interest expense
    
    
    
    
    
    
    
    
    
    
    17,041
    
    
    
    17,041Income before taxes on income
    
    $
    80,387
    
    
    $
    6,654
    
    
    $
    (51,632
    )
    
    $
    35,409
 14




---



##### 



*CorporateIKON North
    
    
    IKON
    
    
    andAmerica
    
    
    Europe
    
    
    Eliminations
    
    
    TotalThree Months Ended March 31, 2007Revenues:Equipment
    
    $
    395,592
    
    
    $
    58,094
    
    
    $
    
    
    
    $
    453,686Customer service and supplies
    
    
    302,407
    
    
    
    42,860
    
    
    
    
    
    
    
    345,267Managed and professional services
    
    
    183,443
    
    
    
    14,794
    
    
    
    
    
    
    
    198,237Rental and fees
    
    
    32,661
    
    
    
    1,915
    
    
    
    
    
    
    
    34,576Other
    
    
    
    
    
    
    18,970
    
    
    
    
    
    
    
    18,970Total revenues
    
    
    914,103
    
    
    
    136,633
    
    
    
    
    
    
    
    1,050,736Cost of Revenues:Equipment
    
    
    299,559
    
    
    
    38,150
    
    
    
    
    
    
    
    337,709Customer service and supplies
    
    
    172,296
    
    
    
    30,395
    
    
    
    
    
    
    
    202,691Managed and professional services
    
    
    131,085
    
    
    
    13,126
    
    
    
    
    
    
    
    144,211Rental and fees
    
    
    8,276
    
    
    
    210
    
    
    
    
    
    
    
    8,486Other
    
    
    
    
    
    
    12,630
    
    
    
    
    
    
    
    12,630Total cost of revenues
    
    
    611,216
    
    
    
    94,511
    
    
    
    
    
    
    
    705,727Gross Profit:Equipment
    
    
    96,033
    
    
    
    19,944
    
    
    
    
    
    
    
    115,977Customer service and supplies
    
    
    130,111
    
    
    
    12,465
    
    
    
    
    
    
    
    142,576Managed and professional services
    
    
    52,358
    
    
    
    1,668
    
    
    
    
    
    
    
    54,026Rental and fees
    
    
    24,385
    
    
    
    1,705
    
    
    
    
    
    
    
    26,090Other
    
    
    
    
    
    
    6,340
    
    
    
    
    
    
    
    6,340Total gross profit
    
    
    302,887
    
    
    
    42,122
    
    
    
    
    
    
    
    345,009Selling and administrative
    
    
    221,437
    
    
    
    33,832
    
    
    
    38,011
    
    
    
    293,280Operating income
    
    
    81,450
    
    
    
    8,290
    
    
    
    (38,011
    )
    
    
    51,729Interest income
    
    
    
    
    
    
    
    
    
    
    3,039
    
    
    
    3,039Interest expense
    
    
    
    
    
    
    
    
    
    
    12,530
    
    
    
    12,530Income before taxes on income
    
    $
    81,450
    
    
    $
    8,290
    
    
    $
    (47,502
    )
    
    $
    42,238
  *CorporateIKON North
    
    
    IKON
    
    
    andAmerica
    
    
    Europe
    
    
    Eliminations
    
    
    TotalSix Months Ended March 31, 2008Revenues:Equipment
    
    $
    714,377
    
    
    $
    132,906
    
    
    $
    
    
    
    $
    847,283Customer service and supplies
    
    
    597,684
    
    
    
    96,884
    
    
    
    
    
    
    
    694,568Managed and professional services
    
    
    389,982
    
    
    
    26,950
    
    
    
    
    
    
    
    416,932Rental and fees
    
    
    61,035
    
    
    
    3,449
    
    
    
    
    
    
    
    64,484Other
    
    
    
    
    
    
    33,988
    
    
    
    
    
    
    
    33,988Total revenues
    
    
    1,763,078
    
    
    
    294,177
    
    
    
    
    
    
    
    2,057,255Cost of Revenues:Equipment
    
    
    536,414
    
    
    
    88,071
    
    
    
    
    
    
    
    624,485Customer service and supplies
    
    
    336,426
    
    
    
    68,322
    
    
    
    
    
    
    
    404,748Managed and professional services
    
    
    275,636
    
    
    
    24,652
    
    
    
    
    
    
    
    300,288Rental and fees
    
    
    14,687
    
    
    
    446
    
    
    
    
    
    
    
    15,133Other
    
    
    
    
    
    
    22,147
    
    
    
    
    
    
    
    22,147Total cost of revenues
    
    
    1,163,163
    
    
    
    203,638
    
    
    
    
    
    
    
    1,366,801Gross Profit:Equipment
    
    
    177,963
    
    
    
    44,835
    
    
    
    
    
    
    
    222,798Customer service and supplies
    
    
    261,258
    
    
    
    28,562
    
    
    
    
    
    
    
    289,820Managed and professional services
    
    
    114,346
    
    
    
    2,298
    
    
    
    
    
    
    
    116,644Rental and fees
    
    
    46,348
    
    
    
    3,003
    
    
    
    
    
    
    
    49,351Other
    
    
    
    
    
    
    11,841
    
    
    
    
    
    
    
    11,841Total gross profit
    
    
    599,915
    
    
    
    90,539
    
    
    
    
    
    
    
    690,454Selling and administrative
    
    
    452,909
    
    
    
    74,354
    
    
    
    67,226
    
    
    
    594,489
 15




---



##### 



*CorporateIKON North
    
    
    IKON
    
    
    andAmerica
    
    
    Europe
    
    
    Eliminations
    
    
    TotalRestructuring charge
    
    
    6,612
    
    
    
    
    
    
    
    
    
    
    
    6,612Operating income
    
    
    140,394
    
    
    
    16,185
    
    
    
    (67,226
    )
    
    
    89,353Interest income
    
    
    
    
    
    
    
    
    
    
    3,281
    
    
    
    3,281Interest expense
    
    
    
    
    
    
    
    
    
    
    30,277
    
    
    
    30,277Income before taxes on income
    
    $
    140,394
    
    
    $
    16,185
    
    
    $
    (94,222
    )
    
    $
    62,357
 *CorporateIKON North
    
    
    IKON
    
    
    andAmerica
    
    
    Europe
    
    
    Eliminations
    
    
    TotalSix Months Ended March 31, 2007Revenues:Equipment
    
    $
    757,347
    
    
    $
    112,576
    
    
    $
    
    
    
    $
    869,923Customer service and supplies
    
    
    607,024
    
    
    
    84,213
    
    
    
    
    
    
    
    691,237Managed and professional services
    
    
    361,916
    
    
    
    28,564
    
    
    
    
    
    
    
    390,480Rental and fees
    
    
    65,853
    
    
    
    4,131
    
    
    
    
    
    
    
    69,984Other
    
    
    
    
    
    
    36,996
    
    
    
    
    
    
    
    36,996Total revenues
    
    
    1,792,140
    
    
    
    266,480
    
    
    
    
    
    
    
    2,058,620Cost of Revenues:Equipment
    
    
    577,081
    
    
    
    73,012
    
    
    
    
    
    
    
    650,093Customer service and supplies
    
    
    337,983
    
    
    
    58,938
    
    
    
    
    
    
    
    396,921Managed and professional services
    
    
    261,010
    
    
    
    25,453
    
    
    
    
    
    
    
    286,463Rental and fees
    
    
    17,968
    
    
    
    427
    
    
    
    
    
    
    
    18,395Other
    
    
    
    
    
    
    24,627
    
    
    
    
    
    
    
    24,627Total cost of revenues
    
    
    1,194,042
    
    
    
    182,457
    
    
    
    
    
    
    
    1,376,499Gross Profit:Equipment
    
    
    180,266
    
    
    
    39,564
    
    
    
    
    
    
    
    219,830Customer service and supplies
    
    
    269,041
    
    
    
    25,275
    
    
    
    
    
    
    
    294,316Managed and professional services
    
    
    100,906
    
    
    
    3,111
    
    
    
    
    
    
    
    104,017Rental and fees
    
    
    47,885
    
    
    
    3,704
    
    
    
    
    
    
    
    51,589Other
    
    
    
    
    
    
    12,369
    
    
    
    
    
    
    
    12,369Total gross profit
    
    
    598,098
    
    
    
    84,023
    
    
    
    
    
    
    
    682,121Selling and administrative
    
    
    441,209
    
    
    
    66,886
    
    
    
    73,322
    
    
    
    581,417Operating income
    
    
    156,889
    
    
    
    17,137
    
    
    
    (73,322
    )
    
    
    100,704Interest income
    
    
    
    
    
    
    
    
    
    
    6,399
    
    
    
    6,399Interest expense
    
    
    
    
    
    
    
    
    
    
    24,982
    
    
    
    24,982Income before taxes on income
    
    $
    156,889
    
    
    $
    17,137
    
    
    $
    (91,905
    )
    
    $
    82,121
 
 *
    
    Corporate and Eliminations, which is not treated as a business segment, includes certain
corporate and administrative functions such as finance, legal and customer support. 12. RESTRUCTURING
   16




---



##### 



CashFiscal 2008
    
    Payments
    
    Fiscal 2008
    
    Balance atCharge
    
    Fiscal 2008
    
    Adjustments*
    
    March 31, 2008Severance
    
    $
    6,683
    
    
    $
    299
    
    
    $
    (71
    )
    
    $
    6,313
 
 *
    
    The adjustments in the table above are the result of revising our estimates based on more
recent information which we did not have at the time the reserve was established. The
adjustments made during the three months ended March 31, 2008, were not material to our
consolidated financial statements.  Fiscal 2008
    
    Fiscal 2009
    
    Fiscal 2010
    
    Total$ 4,182
    
    $1,546
    
    $585
    
    $6,313
  Remaining EmployeesFiscal 2008
    
    Fiscal 2008
    
    yet to beEmployees
    
    Employee
    
    Employee
    
    TerminatedHeadcount Reductions
    
    Affected
    
    Terminations
    
    Adjustments
    
    at March 31, 2008U.S. field and
operations
organizations
    
    
    251

    
    
    105

    
    
    (8

    )
    
    138Corporate staff
    
    
    35

    
    
    28

    
    
    (3
    )

    
    4Total
    
    
    286

    
    
    133

    
    
    (11
    )

    
    142
 13. PENSION PLANS
  Three Months Ended March 312008
    
    
    2007U.S.
    
    
    Non-U.S.
    
    
    U.S.
    
    
    Non-U.S.Plans
    
    
    Plans
    
    
    Plans
    
    
    PlansService cost
    
    $
    
    
    
    $
    803
    
    
    $
    
    
    
    $
    700Interest cost
    
    
    8,464
    
    
    
    1,390
    
    
    
    8,191
    
    
    
    1,242Expected return on assets
    
    
    (8,802
    )
    
    
    (1,543
    )
    
    
    (9,089
    )
    
    
    (1,411
    )Amortization of prior service cost
    
    
    
    
    
    
    (60
    )
    
    
    
    
    
    
    (51
    )Recognized net actuarial loss
    
    
    688
    
    
    
    101
    
    
    
    673
    
    
    
    250Net periodic pension cost (income)
    
    $
    350
    
    
    $
    691
    
    
    $
    (225
    )
    
    $
    730
 Six Months Ended March 312008
    
    
    2007U.S.
    
    
    Non-U.S.
    
    
    U.S.
    
    
    Non-U.S.Plans
    
    
    Plans
    
    
    Plans
    
    
    PlansService cost
    
    $
    
    
    
    $
    1,625
    
    
    $
    
    
    
    $
    1,420Interest cost
    
    
    16,928
    
    
    
    2,821
    
    
    
    16,382
    
    
    
    2,476Expected return on assets
    
    
    (17,605
    )
    
    
    (3,133
    )
    
    
    (18,178
    )
    
    
    (2,811
    )Amortization of prior service cost
    
    
    
    
    
    
    (120
    )
    
    
    
    
    
    
    (103
    )Recognized net actuarial loss
    
    
    1,377
    
    
    
    206
    
    
    
    1,346
    
    
    
    497Net periodic pension cost (income)
    
    $
    700
    
    
    $
    1,399
    
    
    $
    (450
    )
    
    $
    1,479
  17




---



##### 



14.
RECLASSIFICATION
 Statement of Cash Flows
  Six Months EndedMarch 31, 2007
    
    
    
    
    
    Six Months EndedAs previously
    
    
    
    
    
    March 31, 2007reported
    
    Adjustment
    
    As revisedCash Flows from Operating ActivitiesDecrease in finance lease receivables
    
    
    
    
    
    
    4,249
    
    
    
    4,249Total net cash used in operating activities
    
    
    (11,472
    )
    
    
    4,249
    
    
    
    (7,223
    )Cash Flows from Investing ActivitiesProceeds from the sale of lease receivables
    
    
    106,964
    
    
    
    (106,964
    )
    
    
    Lease receivables  additions
    
    
    (152,026
    )
    
    
    152,026
    
    
    
    Lease receivables  collections
    
    
    49,311
    
    
    
    (49,311
    )
    
    
    Total net cash used in investing activities
    
    
    (12,325
    )
    
    
    (4,249
    )
    
    
    (16,574
    )
  Three Months EndedDecember 31, 2007
    
    
    
    
    
    Three Months EndedAs previously
    
    
    
    
    
    Ended December 31, 2007reported
    
    Adjustment
    
    As revisedCash Flows from Operating ActivitiesIncrease in finance lease receivables
    
    
    
    
    
    
    (2,360
    )
    
    
    (2,360
    )Total net cash used in operating activities
    
    
    (15,707
    )
    
    
    (2,360
    )
    
    
    (18,067
    )Cash Flows from Investing ActivitiesProceeds from the sale of lease receivables
    
    
    52,325
    
    
    
    (52,325
    )
    
    
    Lease receivables  additions
    
    
    (82,696
    )
    
    
    82,696
    
    
    
    Lease receivables  collections
    
    
    28,011
    
    
    
    (28,011
    )
    
    
    Total net cash used in investing activities
    
    
    (13,331
    )
    
    
    2,360
    
    
    
    (10,971
    )
 Three Months EndedDecember 31, 2006
    
    
    
    
    
    Three Months EndedAs previously
    
    
    
    
    
    Ended December 31, 2006reported
    
    Adjustment
    
    As revisedCash Flows from Operating ActivitiesIncrease in finance lease receivables
    
    
    
    
    
    
    (2,847
    )
    
    
    (2,847
    )Total net cash used in operating activities
    
    
    (8,440
    )
    
    
    (2,847
    )
    
    
    (11,287
    )Cash Flows from Investing ActivitiesProceeds from the sale of lease receivables
    
    
    53,481
    
    
    
    (53,481
    )
    
    
    Lease receivables  additions
    
    
    (80,925
    )
    
    
    80,925
    
    
    
    Lease receivables  collections
    
    
    24,597
    
    
    
    (24,597
    )
    
    
    Total net cash used in investing activities
    
    
    (9,994
    )
    
    
    2,847
    
    
    
    (7,147
    )
  Fiscal 2007As previously
    
    
    
    
    
    Fiscal 2007reported
    
    Adjustment
    
    As revisedCash Flows from Operating ActivitiesDecrease in finance lease receivables
    
    
    
    
    
    
    4,019
    
    
    
    4,019Total net cash provided by operating activities
    
    
    167,881
    
    
    
    4,019
    
    
    
    171,900Cash Flows from Investing ActivitiesProceeds from the sale of lease receivables
    
    
    238,618
    
    
    
    (238,618
    )
    
    
    Lease receivables  additions
    
    
    (332,305
    )
    
    
    332,305
    
    
    
    Lease receivables  collections
    
    
    97,706
    
    
    
    (97,706
    )
    
    
    Total net cash used in investing activities
    
    
    (45,138
    )
    
    
    (4,019
    )
    
    
    (49,157
    )
 Fiscal 2006As previously
    
    
    
    
    
    Fiscal 2006reported
    
    Adjustment
    
    As revisedCash Flows from Operating ActivitiesDecrease in finance lease receivables
    
    
    
    
    
    
    145,989
    
    
    
    145,989Total net cash provided by operating activities
    
    
    100,312
    
    
    
    145,989
    
    
    
    246,301Cash Flows from Investing ActivitiesProceeds from the sale of lease receivables
    
    
    201,687
    
    
    
    (201,687
    )
    
    
    Lease receivables  additions
    
    
    (348,119
    )
    
    
    348,119
    
    
    
    Lease receivables  collections
    
    
    292,421
    
    
    
    (292,421
    )
    
    
    Total net cash provided by investing activities
    
    
    327,558
    
    
    
    (145,989
    )
    
    
    181,569
 Fiscal 2005As previously
    
    
    
    
    
    Fiscal 2005reported
    
    Adjustment
    
    As revisedCash Flows from Operating ActivitiesDecrease in finance lease receivables
    
    
    
    
    
    
    394,720
    
    
    
    394,720Total net cash provided by operating activities
    
    
    10,686
    
    
    
    394,720
    
    
    
    405,406Cash Flows from Investing ActivitiesProceeds from the sale of lease receivables
    
    
    249,083
    
    
    
    (249,083
    )
    
    
    Lease receivables  additions
    
    
    (385,630
    )
    
    
    385,630
    
    
    
    Lease receivables  collections
    
    
    531,267
    
    
    
    (531,267
    )
    
    
    Total net cash provided by investing activities
    
    
    423,666
    
    
    
    (394,720
    )
    
    
    28,946
 15. SUBSEQUENT EVENT
  18




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 OVERVIEW
 The Company
  Summary of Consolidated Results
 Three Months Ended
    
    
    
    
    
    Six Months EndedMarch 31
    
    
    
    
    
    March 312008
    
    2007
    
    Change
    
    2008
    
    2007
    
    ChangeRevenue
    
    $
    1,059,200
    
    
    $
    1,050,736
    
    
    
    0.8%

    
    $
    2,057,255
    
    
    $
    2,058,620
    
    
    
    (0.1
    )%Selling and
administrative
expense as a % of
revenue
    
    
    28.2
    %
    
    
    27.9
    %
    
    30 basis points
    
    
    28.9
    %
    
    
    28.2
    %
    
    70 basis pointsOperating income as % of
revenue
    
    
    4.9
    %
    
    
    4.9
    %
    
    
    

    
    
    4.3
    %
    
    
    4.9
    %
    
    (60) basis pointsDiluted earnings per share
    
    $
    0.24
    
    
    $
    0.24
    
    
    
    

    
    $
    0.36
    
    
    $
    0.45
    
    
    
    (20
    )%
   19




---



##### 



Outlook
  RESULTS OF OPERATIONS
 Reportable Segments
  Three Months Ended March 31, 2008 Compared to the Three Months Ended March 31, 2007
 IKON North
    
    IKONEquipment
    
    America
    
    Europe
    
    TotalThree Months Ended March 31, 2008Revenues
    
    $
    383,592
    
    
    $
    71,048
    
    
    $
    454,640Gross profit
    
    $
    98,701
    
    
    $
    22,398
    
    
    $
    121,099Gross profit %
    
    
    25.7
    %
    
    
    31.5
    %
    
    
    26.6
    %Three Months Ended March 31, 2007Revenues
    
    $
    395,592
    
    
    $
    58,094
    
    
    $
    453,686Gross profit
    
    $
    96,033
    
    
    $
    19,944
    
    
    $
    115,977Gross profit %
    
    
    24.3
    %
    
    
    34.3
    %
    
    
    25.6
    %$ ChangeRevenues
    
    $
    (12,000
    )
    
    $
    12,954
    
    
    $
    954Gross profit
    
    $
    2,668
    
    
    $
    2,454
    
    
    $
    5,122% ChangeRevenues
    
    
    (3.0
    )%
    
    
    22.3
    %
    
    
    0.2
    %
  20




---



##### 



IKON North
    
    IKONCustomer Service and Supplies
    
    America
    
    Europe
    
    TotalThree Months Ended March 31, 2008Revenues
    
    $
    294,587
    
    
    $
    49,760
    
    
    $
    344,347Gross profit
    
    $
    123,503
    
    
    $
    14,186
    
    
    $
    137,689Gross profit %
    
    
    41.9
    %
    
    
    28.5
    %
    
    
    40.0
    %Three Months Ended March 31, 2007Revenues
    
    $
    302,407
    
    
    $
    42,860
    
    
    $
    345,267Gross profit
    
    $
    130,111
    
    
    $
    12,465
    
    
    $
    142,576Gross profit %
    
    
    43.0
    %
    
    
    29.1
    %
    
    
    41.3
    %$ ChangeRevenues
    
    $
    (7,820
    )
    
    $
    6,900
    
    
    $
    (920
    )Gross profit
    
    $
    (6,608
    )
    
    $
    1,721
    
    
    $
    (4,887
    )% ChangeRevenues
    
    
    (2.6
    )%
    
    
    16.1
    %
    
    
    (0.3
    )%
  21




---



##### 



IKON North
    
    IKONManaged and Professional Services
    
    America
    
    Europe
    
    TotalThree Months Ended March 31, 2008Revenues
    
    $
    198,523
    
    
    $
    12,534
    
    
    $
    211,057Gross profit
    
    $
    58,974
    
    
    $
    949
    
    
    $
    59,923Gross profit %
    
    
    29.7
    %
    
    
    7.6
    %
    
    
    28.4
    %Three Months Ended March 31, 2007Revenues
    
    $
    183,443
    
    
    $
    14,794
    
    
    $
    198,237Gross profit
    
    $
    52,358
    
    
    $
    1,668
    
    
    $
    54,026Gross profit %
    
    
    28.5
    %
    
    
    11.3
    %
    
    
    27.3
    %$ ChangeRevenues
    
    $
    15,080
    
    
    $
    (2,260
    )
    
    $
    12,820Gross profit
    
    $
    6,616
    
    
    $
    (719
    )
    
    $
    5,897% ChangeRevenues
    
    
    8.2
    %
    
    
    (15.3
    )%
    
    
    6.5
    %
    22




---



##### 



Rental and Fees
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalThree Months Ended March 31, 2008Revenues
    
    $
    31,901
    
    
    $
    1,620
    
    
    $
    33,521Gross profit
    
    $
    24,693
    
    
    $
    1,393
    
    
    $
    26,086Gross profit %
    
    
    77.4
    %
    
    
    86.0
    %
    
    
    77.8
    %Three Months Ended March 31, 2007Revenues
    
    $
    32,661
    
    
    $
    1,915
    
    
    $
    34,576Gross profit
    
    $
    24,385
    
    
    $
    1,705
    
    
    $
    26,090Gross profit %
    
    
    74.7
    %
    
    
    89.0
    %
    
    
    75.5
    %$ ChangeRevenues
    
    $
    (760
    )
    
    $
    (295
    )
    
    $
    (1,055
    )Gross profit
    
    $
    308
    
    
    $
    (312
    )
    
    $
    (4
    )% ChangeRevenues
    
    
    (2.3
    )%
    
    
    (15.4
    )%
    
    
    (3.1
    )%
  Other Revenue
 Finance Income
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalThree Months Ended March 31, 2008Finance income
    
    
    
    $
    6,073
    
    
    $
    6,073Finance income gross profit
    
    
    
    $
    4,432
    
    
    $
    4,432Finance income gross profit %
    
    
    
    
    73.0
    %
    
    
    73.0
    %Three Months Ended March 31, 2007Finance income
    
    
    
    $
    6,166
    
    
    $
    6,166Finance income gross profit
    
    
    
    $
    4,669
    
    
    $
    4,669Finance income gross profit %
    
    
    
    
    75.7
    %
    
    
    75.7
    %$ ChangeFinance income
    
    
    
    $
    (93
    )
    
    
    (93
    )Finance income gross profit
    
    
    
    $
    (237
    )
    
    
    (237
    )% ChangeFinance income
    
    
    
    
    (1.5
    )%
    
    
    (1.5
    )%
  Other
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalThree Months Ended March 31, 2008Other
    
    
    
    
    
    $
    9,562
    
    
    $
    9,562Other gross profit
    
    
    
    
    
    $
    1,330
    
    
    $
    1,330Other gross profit%
    
    
    
    
    
    
    13.9
    %
    
    
    13.9
    %Three Months Ended March 31, 2007
 23




---



##### 



IKON North
    
    IKONAmerica
    
    Europe
    
    TotalOther
    
    
    
    
    
    $
    12,804
    
    
    $
    12,804Other gross profit
    
    
    
    
    
    $
    1,671
    
    
    $
    1,671Other gross profit%
    
    
    
    
    
    
    13.1
    %
    
    
    13.1
    %$ ChangeOther
    
    
    
    
    
    $
    (3,242
    )
    
    $
    (3,242
    )Other gross profit
    
    
    
    
    
    $
    (341
    )
    
    $
    (341
    )% ChangeOther
    
    
    
    
    
    
    (25.3
    )%
    
    
    (25.3
    )%
  Selling and Administrative Expenses
 2008
    
    2007
    
    $ Change
    
    % ChangeSelling and administrative expenses
    
    $
    299,060
    
    
    $
    293,280
    
    
    $
    5,780
    
    
    
    2.0
    %Selling and administrative
expenses as a % of revenue
    
    
    28.2
    %
    
    
    27.9
    %
   
    
    an increase in compensation expense of $14,696, primarily as a result of higher
selling wages, due to a year-over-year increase in sales headcount, driven by the
investment in additional sales representatives in the second half of fiscal 2007;
    
    a decrease of $2,037 as a result of lower spending for professional fees;
    
    a decrease of $1,717 due to lower spending on information technology and related
expenses; and
    
    a decrease of $3,655 due to the mark-to-market adjustment of our unfunded deferred
compensation obligations.
 Other Items
 2008
    
    2007
    
    $ ChangeRestructuring benefit
    
    
    71
    
    
    
    
    
    
    
    71Interest income
    
    
    880
    
    
    
    3,039
    
    
    
    (2,159
    )Interest expense
    
    
    17,041
    
    
    
    12,530
    
    
    
    4,511Taxes on income
    
    
    12,920
    
    
    
    11,785
    
    
    
    1,135Net income
    
    
    22,489
    
    
    
    30,453
    
    
    
    (7,964
    )Diluted earnings per common share
    
    $
    0.24
    
    
    $
    0.24
    
    
    
    
    24




---



##### 



Six Months Ended March 31, 2008 Compared to the Six Months Ended March 31, 2007
 Equipment
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalSix Months Ended March 31, 2008Revenues
    
    $
    714,377
    
    
    $
    132,906
    
    
    $
    847,283Gross profit
    
    $
    177,963
    
    
    $
    44,835
    
    
    $
    222,798Gross profit %
    
    
    24.9
    %
    
    
    33.7
    %
    
    
    26.3
    %Six Months Ended March 31, 2007Revenues
    
    $
    757,347
    
    
    $
    112,576
    
    
    $
    869,923Gross profit
    
    $
    180,266
    
    
    $
    39,564
    
    
    $
    219,830Gross profit %
    
    
    23.8
    %
    
    
    35.1
    %
    
    
    25.3
    %$ ChangeRevenues
    
    $
    (42,970
    )
    
    $
    20,330
    
    
    $
    (22,640
    )Gross profit
    
    $
    (2,303
    )
    
    $
    5,271
    
    
    $
    2,968% ChangeRevenues
    
    
    (5.7
    )%
    
    
    18.1
    %
    
    
    (2.6
    )%
   25




---



##### 



Customer Service and Supplies
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalSix Months Ended March 31, 2008Revenues
    
    $
    597,684
    
    
    $
    96,884
    
    
    $
    694,568Gross profit
    
    $
    261,258
    
    
    $
    28,562
    
    
    $
    289,820Gross profit %
    
    
    43.7
    %
    
    
    29.5
    %
    
    
    41.7
    %Six Months Ended March 31, 2007Revenues
    
    $
    607,024
    
    
    $
    84,213
    
    
    $
    691,237Gross profit
    
    $
    269,041
    
    
    $
    25,275
    
    
    $
    294,316Gross profit %
    
    
    44.3
    %
    
    
    30.0
    %
    
    
    42.6
    %$ ChangeRevenues
    
    $
    (9,340
    )
    
    $
    12,671
    
    
    $
    3,331Gross profit
    
    $
    (7,783
    )
    
    $
    3,287
    
    
    $
    (4,496
    )% ChangeRevenues
    
    
    (1.5
    )%
    
    
    15.0
    %
    
    
    0.5
    %
    Managed and Professional Services
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalSix Months Ended March 31, 2008Revenues
    
    $
    389,982
    
    
    $
    26,950
    
    
    $
    416,932Gross profit
    
    $
    114,346
    
    
    $
    2,298
    
    
    $
    116,644Gross profit %
    
    
    29.3
    %
    
    
    8.5
    %
    
    
    28.0
    %Six Months Ended March 31, 2007Revenues
    
    $
    361,916
    
    
    $
    28,564
    
    
    $
    390,480Gross profit
    
    $
    100,906
    
    
    $
    3,111
    
    
    $
    104,017Gross profit %
    
    
    27.9
    %
    
    
    10.9
    %
    
    
    26.6
    %$ ChangeRevenues
    
    $
    28,066
    
    
    $
    (1,614
    )
    
    $
    26,452Gross profit
    
    $
    13,440
    
    
    $
    (813
    )
    
    $
    12,627% ChangeRevenues
    
    
    7.8
    %
    
    
    (5.7
    )%
    
    
    6.8
    %
  26




---



##### 



Rental and Fees
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalSix Months Ended March 31, 2008Revenues
    
    $
    61,035
    
    
    $
    3,449
    
    
    $
    64,484Gross profit
    
    $
    46,348
    
    
    $
    3,003
    
    
    $
    49,351Gross profit %
    
    
    75.9
    %
    
    
    87.1
    %
    
    
    76.5
    %Six Months Ended March 31, 2007Revenues
    
    $
    65,853
    
    
    $
    4,131
    
    
    $
    69,984Gross profit
    
    $
    47,885
    
    
    $
    3,704
    
    
    $
    51,589Gross profit %
    
    
    72.7
    %
    
    
    89.7
    %
    
    
    73.7
    %$ ChangeRevenues
    
    $
    (4,818
    )
    
    $
    (682
    )
    
    $
    (5,500
    )Gross profit
    
    $
    (1,537
    )
    
    $
    (701
    )
    
    $
    (2,238
    )% ChangeRevenues
    
    
    (7.3
    )%
    
    
    (16.5
    )%
    
    
    (7.9
    )%
  Other Revenue
 Finance Income
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalSix Months Ended March 31, 2008Finance income
    
    
    
    
    
    $
    12,376
    
    
    $
    12,376Finance income gross profit
    
    
    
    
    
    $
    8,908
    
    
    $
    8,908Finance income gross profit %
    
    
    
    
    
    
    72.0
    %
    
    
    72.0
    %Six Months Ended March 31, 2007Finance income
    
    
    
    
    
    $
    12,141
    
    
    $
    12,141Finance income gross profit
    
    
    
    
    
    $
    9,226
    
    
    $
    9,226Finance income gross profit %
    
    
    
    
    
    
    76.0
    %
    
    
    76.0
    %$ ChangeFinance income
    
    
    
    
    
    $
    235
    
    
    $
    235Finance income gross profit
    
    
    
    
    
    $
    (318
    )
    
    $
    (318
    )% ChangeFinance income
    
    
    
    
    
    
    1.9
    %
    
    
    1.9
    %
 27




---



##### 



Other
 IKON North
    
    IKONAmerica
    
    Europe
    
    TotalSix Months Ended March 31, 2008Other revenue
    
    
    
    
    
    $
    21,612
    
    
    $
    21,612Other gross profit
    
    
    
    
    
    $
    2,933
    
    
    $
    2,933Other gross profit%
    
    
    
    
    
    
    13.6
    %
    
    
    13.6
    %Six Months Ended March 31, 2007Other revenue
    
    
    
    
    
    $
    24,855
    
    
    $
    24,855Other gross profit
    
    
    
    
    
    $
    3,143
    
    
    $
    3,143Other gross profit%
    
    
    
    
    
    
    12.6
    %
    
    
    12.6
    %$ ChangeOther revenue
    
    
    
    
    
    $
    (3,243
    )
    
    $
    (3,243
    )Other gross profit
    
    
    
    
    
    $
    (210
    )
    
    $
    (210
    )% ChangeOther revenue
    
    
    
    
    
    
    (13.0
    )%
    
    
    (13.0
    )%
  Selling and Administrative Expenses
 2008
    
    2007
    
    $ Change
    
    % ChangeSelling and administrative expenses
    
    $
    594,489
    
    
    $
    581,417
    
    
    $
    13,072
    
    
    
    2.2
    %Selling and administrative
expenses as a % of revenue
    
    
    28.9
    %
    
    
    28.2
    %
   
    
    an increase in compensation expense of approximately $24,232, primarily as a result
of higher selling wages, due to a year-over-increase in sales headcount, driven by the
investment in additional sales representatives in the second half of fiscal 2007;
    
    a decrease of approximately $3,289 as a result of lower spending for professional
fees, offset by an increase in spending on contract labor of approximately $2,004;
    
    a decrease of approximately $2,718 related to lower spending on information
technology and lower depreciation expense; and
    
    a decrease of approximately $6,374 due to the mark-to-market adjustment of our
unfunded deferred compensation obligations.
 Other Items
 2008
    
    2007
    
    $ ChangeRestructuring charge
    
    $
    6,612
    
    
    $
    
    
    
    $
    6,612Interest income
    
    
    3,281
    
    
    
    6,399
    
    
    
    (3,118
    )Interest expense
    
    
    30,277
    
    
    
    24,982
    
    
    
    5,295Taxes on income
    
    
    24,895
    
    
    
    24,331
    
    
    
    564Net income
    
    
    37,462
    
    
    
    57,790
    
    
    
    (20,328
    )Diluted earnings per common share
    
    $
    0.36
    
    
    $
    0.45
    
    
    $
    (0.09
    )
 28




---



##### 



FINANCIAL CONDITION AND LIQUIDITY
 Cash Flows and Liquidity
  2008Cash provided by operating activities
    
    $
    59,271Cash used in investing activities
    
    
    (25,407
    )Cash used in financing activities
    
    
    (178,758
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (1,301
    )Decrease in cash and cash equivalents
    
    
    (146,195
    )Cash and cash equivalents at the beginning of the year
    
    
    349,237Cash and cash equivalents at the end of period
    
    $
    203,042
  Operating Cash Flows
  29




---



##### 



Investing Cash Flows
  Financing Cash Flows
  Capital Structure
   Payments Due by PeriodLess ThanTotal
    
    1 Year
    
    1-3 Years
    
    3-5 Years
    
    Thereafter2012 Notes
    
    $
    213,866
    
    
    $
    11,820
    
    
    $
    47,946
    
    
    $
    154,100
    
    
    
    
   30




---



##### 



Period
    
    PercentageIssue date through July 1, 2008
    
    
    100
    %July 2, 2008 through April 1, 2009
    
    
    103
    %April 2, 2009 through January 1, 2010
    
    
    102
    %After January 1, 2010
    
    
    100
    %
 Liquidity Outlook
     RESTRUCTURING
   CashFiscal 2008
    
    Payments
    
    Fiscal 2008
    
    Balance atCharge
    
    Fiscal 2008
    
    Adjustments*
    
    March 31, 2008Severance
    
    $
    6,683
    
    
    $
    299
    
    
    $
    (71
    )
    
    $
    6,313
 
 *
    
    The adjustments in the table above are the result of revising our estimates based on more
recent information which we did not have at the time the reserve was established. The
adjustments made during the three months ended March 31, 2008, were not material to our
consolidated financial statements. 31




---



##### 



Fiscal 2008
    
    Fiscal 2009
    
    Fiscal 2010
    
    Total$4,182
    
    $
    1,546
    
    
    $
    585
    
    
    $
    6,313
  Remaining EmployeesFiscal 2008
    
    Fiscal 2008
    
    yet to beEmployees
    
    Employee
    
    Employee
    
    TerminatedHeadcount Reductions
    
    Affected
    
    Terminations
    
    Adjustments
    
    at March 31, 2008U.S. field and
operations
organizations
    
    
    251

    
    
    105

    
    
    (8

    )
    
    138Corporate staff
    
    
    35

    
    
    28

    
    
    (3
    )

    
    4Total
    
    
    286

    
    
    133

    
    
    (11
    )

    
    142
 RECENT ACCOUNTING STANDARDS
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  32




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33




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##### 



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchases of Equity
Securities
  ApproximateTotal Number
    
    
    Dollar Valueof Shares
    
    
    of Shares thatTotal Number
    
    
    Average
    
    
    Purchased as
    
    
    May Yet Beof Shares
    
    
    Price Paid
    
    
    Part of
    
    
    Purchased UnderPeriod
    
    Purchased
    
    
    per Share
    
    
    Repurchase Plan
    
    
    the Repurchase PlanJanuary 1, 2008  January 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    315,285February 1, 2008  February 29, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315,285March 1, 2008  March 31, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    315,285$
    315,285
 
 See Note 8 to our consolidated financial statements for further information regarding our
share repurchases. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Director
    
    Votes For
    
    Votes WithheldPhilip E. Cushing, Director
    
    
    69,111,325
    
    
    
    15,525,720Matthew J. Espe, Chairman, President, and Chief Executive Officer
    
    
    68,367,739
    
    
    
    16,269,306Thomas R. Gibson, Lead Independent Director
    
    
    67,749,870
    
    
    
    16,887,175Richard A. Jalkut, Director
    
    
    69,055,598
    
    
    
    15,581,447Arthur E. Johnson, Director
    
    
    69,400,661
    
    
    
    15,236,384Kurt M. Landgraf, Director
    
    
    69,325,198
    
    
    
    15,311,847Gerald Luterman, Director
    
    
    67,718,834
    
    
    
    16,918,211William E. McCracken, Director
    
    
    69,371,053
    
    
    
    15,265,992William L. Meddaugh, Director
    
    
    67,726,594
    
    
    
    16,910,451Hellene S. Runtagh, Director
    
    
    67,696,297
    
    
    
    16,940,748Anthony P. Terracciano, Director
    
    
    63,883,948
    
    
    
    20,753,097
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Proposal
    
    Votes For
    
    Votes Against
    
    AbstentionsPwC Ratification
    
    
    83,338,989
    
    
    
    1,128,557
    
    
    
    1,169,502
 
 Item 5. Other Information
  
 Item 6. Exhibits
 10.1
    
    Senior Executive Employment Agreement for Jeffrey W. Hickling effective February 1, 2008,
filed as Exhibit 10.28 to IKONs Form S-4 dated April 4, 2008, incorporated herein by
reference.31.1
    
    Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended31.2
    
    Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934, as amended32.1
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 135032.2
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
 35




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##### 



SIGNATURES
  IKON OFFICE SOLUTIONS, INC.Date: May 12, 2008By:
    
    /s/ ROBERT F. WOODS

(Robert F. Woods)Senior Vice President and ChiefFinancial Officer(Principal Financial Officer)
 36