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 user 2005-04-23 at 11:15:00 am Views: 85
  • #9072

    IKON May
    Have Accounting Problems: Provides Preliminary Comments on Q2 Results
    MALVERN,Pa.–April 2005– IKON Office Solutions,the world’s largest independent channel
    for document management systems and services, today announced that the company
    will report preliminary financial results for the second quarter of fiscal 2005
    on Thursday, April 28, 2005. The company also announced that it is conducting a
    review of its billing controls and reserve practices for trade accounts
    receivable, and that this review will not be completed by April 28.

    During an analysis of aged trade receivables conducted during the
    quarter, and in connection with performing self-assessment and testing of its
    internal controls over financial reporting under Section 404 of the
    Sarbanes-Oxley Act of 2002, the company identified deficiencies in the processes
    and timeliness by which it issues and adjusts certain invoices. The identified
    deficiencies result from the centralization of billing centers and the migration
    to a new billing platform and relate to the company’s U.S. trade accounts
    receivable, and do not affect receivables arising under the company’s European,
    Canadian and Mexican operations, receivables owing from General Electric Capital
    Corporation (“GE”) under the Company’s leasing relationship with GE, or
    receivables arising under its Legal Document Service and Business Document
    Service businesses.

    In connection with these developments, management
    has initiated a comprehensive review to determine the extent to which certain
    trade receivables as of March 31, 2005 may be overstated due to billing errors
    and insufficient reserves relating to aged receivables. Preliminary sample data
    suggest that trade receivables as of March 31, 2005 may be overstated by an
    estimated $45 million out of a total trade accounts receivables balance of $376
    million. Total accounts receivable as of March 31, 2005 were $721 million.
    Management believes that the estimated overstatement represents a cumulative
    effect over multiple periods, but stressed that the estimate relates to the
    company’s balance sheet as of March 31, 2005, and is based only on the sample
    data assessed to date. As the company completes its detailed analysis, it will
    assess the accuracy of the estimate, evaluate the impact on prior periods, and
    determine the extent to which it will be required to restate results for any
    prior periods. Any impact is expected to be recorded as a non-cash charge that
    will not impact cash flow from operations. Due to the time and effort involved
    in completing the required analysis, the company anticipates that it will need
    to delay filing its Form 10-Q for the fiscal quarter ended March 31, 2005.

    Matthew J. Espe, IKON’s Chairman and Chief Executive Officer commented,
    “We identified this issue and are acting quickly to fully resolve it. We are
    committed to taking every step to fix not only the current issue, but also its
    root causes so that we can remove any barriers to creating profitable growth
    going forward.