content: SECURITIES AND EXCHANGE COMMISSION
  
                               Washington, D. C. 20549
  
                                      Form 10-Q
  
  (Mark One)*
  
  [X] Quarterly report pursuant to section 13 or 15(d) of the Securities  Exchange
  Act of 1934 for the  quarterly  period  ended  June 30,  1997 or [ ]  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. Employer
  incorporation or organization)                        Identification No.)
  
  
                  P. O. Box 834, Valley Forge, Pennsylvania 19482
                      (Address of principal executive offices)
                                     (Zip Code)
  
  
                                   (610) 296-8000
                (Registrant's telephone number, including area code)
  
  
                                        NONE
  (Former  name,  former  address and former  fiscal year,  if changed  since last
  report)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports),  and  (2) has  been  subject  to such  filing
  requirements for the past 90 days.
  
  Yes    X    No
  
  *  Applicable  only to issuers  involved in  bankruptcy  proceedings  during the
  preceding five years:
  
  Indicate  by check mark  whether  the  registrant  has filed all  documents  and
  reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
  Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
  confirmed by a court.
  
  Yes         No
  
  * Applicable only to corporate issuers:
  
  Indicate the number of shares  outstanding  of each of the  issuer's  classes of
  common stock, as of July 31, 1997.
  
  Common Stock, no par value                               132,830,027 shares
  
  <PAGE>
  
                                        INDEX
  
                             IKON OFFICE SOLUTIONS, INC.
  
  
  PART I.  FINANCIAL INFORMATION
  
  
       Item 1.             Financial Statements (Unaudited)
  
                           Consolidated Balance Sheets--June 30, 1997
                           and September 30, 1996
  
                           Consolidated  Statements of Income--Three  months ended
                           June 30, 1997 and June 30,  1996 and Nine months  ended
                           June 30, 1997 and June 30, 1996
  
                           Consolidated  Statements  of  Cash  Flows--Nine  months
                           ended June 30, 1997 and June 30, 1996
  
                           Notes to Consolidated Financial Statements--
                           June 30, 1997
  
  
       Item 2.             Management's Discussion and Analysis of Results
                           of Operations and Financial Condition and Liquidity
  
  PART II.  OTHER INFORMATION
  
      Item 6.              Exhibits and Reports on Form 8-K
  
  SIGNATURES
  
  
  
  <PAGE>
                            PART I. FINANCIAL INFORMATION
  
  Item 1: Financial Statements (unaudited)
  
                             IKON OFFICE SOLUTIONS, INC.
                             CONSOLIDATED BALANCE SHEETS
                                  ( in thousands )
  <TABLE>
  <CAPTION>
                                                                   June 30     September 30
  ASSETS                                                            1997            1996
  <S>                                                              <C>            <C>    
            Current Assets
                 Cash                                              $24,664        $46,056
                 Accounts receivable, net                          722,843        513,378
                 Finance receivables, net                          618,579        435,434
                 Inventories                                       468,448        350,774
                 Prepaid expenses                                  113,068         80,352
                 Deferred taxes                                     96,133         83,161
                                                                ----------     ----------
                 Total current assets                            2,043,735      1,509,155
                                                                ----------     ----------
  
  
            Investments and Long-Term Receivables                   21,167         48,165
  
            Long-Term Finance Receivables, net                   1,220,914        878,324
  
            Equipment on Operating Leases, net                      97,630         95,043
  
            Property and Equipment, at cost                        416,500        358,234
                 Less accumulated depreciation                     207,624        169,416
                                                                ----------     ----------
                                                                   208,876        188,818
                                                                ----------     ----------
  
            Other Assets
                 Goodwill                                        1,319,058      1,087,210
                 Miscellaneous                                     144,838         88,679
                                                                ----------     ----------
                                                                 1,463,896      1,175,889
                                                                ----------     ----------
  
            Net Assets of Discontinued Operations                               1,489,201
                                                                ----------     ----------
  
                                                                $5,056,218     $5,384,595
                                                                ==========     ==========
  </TABLE>
  
  See notes to consolidated financial statements.
  
  <PAGE>
                             IKON OFFICE SOLUTIONS, INC.
                             CONSOLIDATED BALANCE SHEETS
                                  ( in thousands )
  
  <TABLE>
  <CAPTION>
                                                                     June 30         September 30
  LIABILITIES AND SHAREHOLDERS' EQUITY                                 1997              1996
  <S>                                                                 <C>              <C>    
  Current Liabilities
      Current portion of long-term debt                               $58,784          $62,697
      Current portion of long-term debt, finance subsidiaries         375,737          314,000
      Notes payable                                                   273,532          186,462
      Trade accounts payable                                          189,502          123,571
      Accrued salaries, wages and commissions                         100,051          101,632
      Deferred revenues                                               205,580          200,225
      Other accrued expenses                                          242,922          269,400
                                                                  -----------      -----------
      Total current liabilities                                     1,446,108        1,257,987
                                                                  -----------      -----------
  
  Long-Term Debt                                                      491,293          721,923
  
  Long-Term Debt, Finance Subsidiaries                              1,289,504          813,026
  
  Deferred Taxes                                                      259,278          191,272
  
  Other Long-Term Liabilities                                         132,315          144,883
  
  
  Shareholders' Equity
      Series BB conversion preferred stock, no par value:
          3,877 depositary shares issued and outstanding              290,170          290,170
      Common stock, no par value:
          Authorized 300,000 shares
          Issued 6/97 -135,705 shares; 9/96 - 131,930 shares          670,908        1,305,413
      Retained earnings                                               559,986          701,771
      Foreign currency translation adjustment                          (2,135)         (25,187)
      Cost of common shares in treasury: 6/97 - 3,230 shares;
          9/96 - 374 shares                                           (81,209)         (16,663)
                                                                  -----------      -----------
                                                                    1,437,720        2,255,504
                                                                  -----------      -----------
  
                                                                   $5,056,218       $5,384,595
                                                                  ===========      ===========
  
  </TABLE>
  
  See notes to consolidated financial statements.
  
  
  <PAGE>
                             IKON OFFICE SOLUTIONS, INC.
                          CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except earnings per share)
  
  <TABLE>
  <CAPTION>
                                                          Three Months Ended                Nine Months Ended
                                                                June 30                          June 30
                                                         1997              1996           1997             1996
  <S>                                                   <C>              <C>           <C>             <C>       
  Revenues
  Net sales                                             $751,481         $615,245      $2,134,861      $1,715,263
  Service and rentals                                    505,375          403,794       1,439,528       1,152,285
  Finance income                                          59,450           40,086         160,211         107,517
                                                     -----------      -----------     -----------     -----------
                                                       1,316,306        1,059,125       3,734,600       2,975,065
                                                     -----------      -----------     -----------     -----------
  
  Costs and Expenses
  Cost of goods sold                                     475,897          387,266       1,350,623       1,114,398
  Service and rental costs                               251,838          194,553         707,288         552,290
  Finance interest expense                                26,350           17,334          69,731          48,073
  Selling and administrative                             474,541          372,148       1,320,619       1,022,093
  Transformation costs                                    22,961            5,628          98,494          11,931
                                                     -----------      -----------     -----------     -----------
                                                       1,251,587          976,929       3,546,755       2,748,785
                                                     -----------      -----------     -----------     -----------
  
  Operating income                                        64,719           82,196         187,845         226,280
  Interest expense                                        12,089            9,435          31,895          25,942
                                                     -----------      -----------     -----------     -----------
  Income from continuing operations before taxes
      and extraordinary loss                              52,630           72,761         155,950         200,338
  Taxes on income                                         22,502           29,105          66,548          79,259
                                                     -----------      -----------     -----------     -----------
  Income from continuing operations before
       extraordinary loss                                 30,128           43,656          89,402         121,079
  
  Discontinued operations                                                 (20,143)         20,151          34,717
                                                     -----------      -----------     -----------     -----------
  Income before extraordinary loss                        30,128           23,513         109,553         155,796
  Extraordinary loss from early extinguishment
       of debt, net of tax benefit                                                        (12,156)
                                                     -----------      -----------     -----------     -----------
  
  Net Income                                              30,128           23,513          97,397         155,796
  Less:  Preferred Dividends                               4,885            4,885          14,655          17,434
                                                     -----------      -----------     -----------     -----------
  Available to Common Shareholders                       $25,243          $18,628         $82,742        $138,362
                                                     ===========      ===========     ===========     ===========
  
  Earnings (Loss) Per Share (1)
  Continuing Operations                                    $0.19            $0.30           $0.56           $0.82
  Discontinued Operations                                                  $(0.16)          $0.15           $0.28
  Extraordinary loss                                                                       $(0.09)
                                                     -----------      -----------     -----------     -----------
                                                           $0.19            $0.14           $0.62           $1.10
                                                     ===========      ===========     ===========     ===========
  
  </TABLE>
  
  
  (1)  See Exhibit 11 for computation of earnings per share.
  
  See notes to consolidated financial statements.
  
  <PAGE>
                             IKON OFFICE SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (in thousands)
  <TABLE>
  <CAPTION>
                                                                                 Nine Months Ended
                                                                                       June 30
                                                                                1997             1996
  Operating Activities
  <S>                                                                          <C>             <C>     
      Income from continuing operations before extraordinary loss              $89,402         $121,079
      Additions (deductions) to reconcile income from continuing
          operations before extraordinary loss to net cash
          provided by operating activities of continuing operations
             Depreciation                                                       77,335           58,775
             Amortization                                                       34,737           23,571
             Provisions for losses on accounts receivable                       18,385           12,594
             Provision for deferred taxes                                       58,000           50,817
             Writeoff of assets related to transformation                       24,183
             Changes in  operating  assets and  liabilities,  net
                of effects  from acquisitions and divestitures:
                   Increase in accounts receivable                            (175,078)         (70,670)
                   Increase in inventories                                    (105,960)         (44,473)
                   Increase in prepaid expenses                                (34,241)         (61,528)
                   Increase in accounts payable, deferred
                       revenues and accrued expenses                             7,162           68,869
             Miscellaneous                                                      10,453           (3,782)
                                                                           -----------      -----------
  Net cash provided by operating activities of continuing operations             4,378          155,252
  Net cash provided by operating activities of
      discontinued operations                                                   24,174          132,965
                                                                           -----------      -----------
  Net cash provided by operating activities                                     28,552          288,217
  
  Investing activities
      Proceeds from the sale of property and equipment                          25,878           29,163
      Payments made on long-term liabilities                                   (19,501)
      Cost of companies acquired, net of cash acquired                        (128,772)        (123,733)
      Expenditures for property and equipment                                 (128,630)         (85,782)
      Purchase of miscellaneous assets                                         (10,585)         (15,891)
      Finance subsidiaries receivables - additions                          (1,092,435)        (691,842)
      Finance subsidiaries receivables - collections                           477,994          282,967
                                                                           -----------      -----------
  Net cash used in investing activities of continuing operations              (876,051)        (605,118)
  Net cash used in investing activities of discontinued operations             (38,058)        (237,241)
                                                                           -----------      -----------
  Net cash used in investing activities                                       (914,109)        (842,359)
  
  Financing activities
      Proceeds from short-term borrowings, net                                  84,210            5,023
      Proceeds from issuance of long-term debt                                  36,662          429,522
      Proceeds from option exercises and sale of treasury shares                39,348           46,053
      Proceeds from sale of finance subsidiaries lease receivables              77,251           39,571
      Proceeds from (payments to) discontinued operations                      553,700         (152,427)
      Long-term debt repayments                                               (322,971)        (100,473)
      Finance subsidiaries debt - additions                                    697,215          439,743
      Finance subsidiaries debt - repayments                                  (159,000)        (121,232)
      Dividends paid                                                           (43,978)         (68,630)
      Purchase of treasury shares                                             (112,154)         (59,512)
                                                                           -----------      -----------
  Net cash provided by financing activities of continuing operations           850,283          457,638
  Net cash provided by financing activities of discontinued operations          13,882          104,276
                                                                           -----------      -----------
  Net cash provided by financing activities                                    864,165          561,914
                                                                           -----------      -----------
  
  Net (decrease) increase in cash                                              (21,392)           7,772
  Cash at beginning of year                                                     46,056           66,413
                                                                           -----------      -----------
  Cash at end of period                                                        $24,664          $74,185
                                                                           ===========      ===========
  </TABLE>
  
  
  See notes to consolidated financial statements.
  
  <PAGE>
  
                             IKON OFFICE SOLUTIONS, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    JUNE 30, 1997
  
  Note 1:  Basis of Presentation
  
           The accompanying  unaudited condensed consolidated financial statements
  have been prepared in accordance with generally accepted  accounting  principles
  for interim  financial  information  and the  instructions to Form 10-Q and Rule
  10-01  of  Regulation  S-X.  In  the  opinion  of  management,  all  adjustments
  (consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
  presentation  have  been  included.  For  further  information,   refer  to  the
  consolidated   financial  statements  and  footnotes  thereto  included  in  the
  Company's  annual  report on Form 10-K for the year ended  September  30,  1996.
  Certain  prior year amounts have been  reclassified  to conform with the current
  year presentation.
  
  
  Note 2:  Debt
  
              On December 16, 1996,  the Company  entered into a credit  agreement
  with  several  banks  under  which  it  may  borrow  up to  $400  million.  This
  multicurrency  facility replaces a $500 million credit facility which was due to
  expire December 1, 1999 and a $100 million credit facility which was canceled on
  December 2, 1996.  The reduced  credit  commitment  reflects the spin-off of the
  Unisource  business which was effective  December 31, 1996 (see note 3). The new
  agreement,  which expires December 15, 2001,  includes a facility fee of 8 basis
  points per annum on the commitment,  based upon the Company's  current long-term
  debt rating. The agreement provides that loans may be made under either domestic
  or  Eurocurrency  notes at rates  computed  under a selection  of rate  formulas
  including prime or Eurocurrency rates.
  
  
  Note 3: Discontinued Operations and Spin-off
  
           On  June  19,  1996,  the  Company  announced  that it  would  separate
  Unisource  Worldwide,  Inc.  ("Unisource"),  its printing and imaging and supply
  systems  distribution  business from IKON Office Solutions,  Inc. ("IKON"),  its
  office  solutions  business,  with each  business  operating  as a  stand-alone,
  publicly traded company.  In order to effect the separation of these businesses,
  the  Company  declared  a dividend  payable to holders of record of Alco  common
  stock at the  close of  business  on  December  13,  1996 of one share of common
  stock, $.001 par value, of Unisource for every two shares of Alco stock owned on
  December 13, 1996. The distribution  resulted in 100% of the outstanding  shares
  of Unisource common stock being distributed to Alco shareholders by December 31,
  1996.  The Company has accounted for Unisource as a  discontinued  operation for
  all periods  presented in these  financial  statements.  The Company  recorded a
  charge  against  earnings of $50 million in the third quarter of fiscal 1996 for
  restructuring  activities  at  Unisource.  In  addition,  an $18 million  charge
  against  earnings  was  recorded  in the third  quarter of fiscal 1996 for costs
  associated with the disposition of Unisource  consisting primarily of investment
  banking fees,  legal and accounting fees,  filing fees and employee  termination
  costs  directly  related  to the  spin-off.  Prior year  amounts  have also been
  restated to reflect the  allocation  of corporate  interest and other  corporate
  expenses to the discontinued operations of the Company.
  
  
  <PAGE>
  
  
                             IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1997
  
  Note 3: Discontinued Operations and Spin-off (Continued)
  
           The  results of  discontinued  operations,  included  in the  Company's
  results of operations through December 31, 1996, are as follows (in thousands):
  
                                Three Months Ended        Nine Months Ended
                                     June 30                  June 30
                                      1996              1997           1996
  
  Revenues                         $1,748,732       $1,728,533      $5,211,718
                                  ===========      ===========     ===========
  
  Income (loss) before taxes
    (including $50 million
     restructuring charge and
     $18 million disposition
     charge in 1996)                 $(23,821)         $34,743         $66,574
  Tax expense (benefit)                (3,678)          14,592          31,857
                                  -----------      -----------     -----------
  Net income  (loss)                 $(20,143)         $20,151         $34,717
                                  ===========      ===========     ===========
  
           The unusual effective tax rates of 15.4% and 47.9% for the three months
  and nine months ended June 30, 1996,  respectively,  result  primarily  from the
  impact of certain  nondeductible  components of the disposition  charge.  Absent
  such impact,  the estimated  effective tax rate for Unisource was  approximately
  39.5%.
  
           The net  carrying  value at  September  30,  1996 of the  assets  to be
    distributed to shareholders consisted of (in thousands):
  
            Working capital                               $750,792
            Net property and equipment                     224,168
            Other assets                                   637,062
            Long-term debt and other liabilities          (122,821)
                                                       -----------
            Unisource equity and intercompany debt      $1,489,201
                                                       ===========
  
           In December 1996,  Unisource repaid $553.5 million of intercompany debt
  outstanding  with the Company and the Unisource  stock was  distributed  to Alco
  shareholders. Equity of the Company was reduced by $952.3 million, which was the
  equity of Unisource at December 31, 1996.
  
  
  Note 4:  Extraordinary Loss on Early Extinguishment of Debt
  
           On December 2, 1996,  Unisource  borrowed under its new credit facility
  to repay  $553.5  million of  intercompany  debt with the  Company.  The Company
  prepaid debt in the amount of $514 million from these funds.  Early repayment of
  this debt resulted in certain prepayment  penalties.  Total prepayment penalties
  of $18.7  million and related tax benefits of $6.5  million are  reflected as an
  extraordinary  loss on early  extinguishment  of debt on the Statement of Income
  for the nine months ended June 30, 1997.
  
  
  Note 5:  Name Change
  
           At their annual meeting on January 23, 1997, the shareholders  voted to
  change the name of the Company  from Alco  Standard  Corporation  to IKON Office
  Solutions,  Inc., the name previously used by Alco's  remaining  operating unit.
  The name change was effective  immediately  and the Company's  ticker symbol was
  changed from ASN to IKN effective January 27, 1997.
  
  <PAGE>
  
                             IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1997
  
  
  Note 6:  Transformation Costs
  
           At the end of fiscal 1995,  the Company  announced  its  transformation
  program to change its organization into a more cohesive and efficient network by
  building a uniform information technology system and implementing best practices
  for critically important management functions throughout the IKON companies.  In
  March 1997, the Company  announced that it was accelerating  the  transformation
  program.  As a result, the Company began to separately disclose these costs as a
  component of operating  expenses on the Statement of Income. The Company expects
  to  complete  the  transformation  program  by  the  end  of  fiscal  1998.  The
  transformation  involves a variety of activities which the Company believes will
  significantly lower administrative  costs and improve margins.  These activities
  include  consolidating  purchasing,   inventory  control,  logistics  and  other
  activities into thirteen  customer  service centers in the U.S.,  establishing a
  single financial  processing center,  building a common  information  technology
  system, adopting a common name and creating marketplace-focused field operations
  with  greater  attention  to  customer  sales and  services.  Costs  charged  to
  transformation  expense relate principally to the write off of the abandoned SAP
  computer platform,  severance and other employee related costs, costs related to
  consultants  assisting with the transformation,  facility  consolidation  costs,
  including  lease  buyouts and  write-offs of leasehold  improvements,  and costs
  incurred in connection with the adoption of the IKON name worldwide.
  
  
  Note 7:  Pending Accounting Change
  
           In  February  1997,  the FASB  issued  Statement  No.  128  (FAS  128),
  "Earnings Per Share",  which simplifies the standards for computing earnings per
  share (EPS). It replaces the  presentation of primary EPS with the  presentation
  of basic and  diluted  EPS.  It also  requires  dual  presentation  of basic and
  diluted EPS. FAS 128 is effective  for financial  statements  issued for periods
  ending after  December 15,  1997.  Earlier  application  is not  permitted.  The
  Company  does not  believe  the  effect  of  adoption  will be  material  on EPS
  previously presented.
  
  <PAGE>
  
  Item 2:  Management's  Discussion  and  Analysis  of Results of  Operations  and
  Financial Condition and Liquidity
  
           On June 19,  1996,  the Company  announced  that it would split its two
  operating units into independent companies by spinning off Unisource,  its paper
  and supply systems distribution group, as a separate publicly owned company. The
  Company  accomplished the transaction  through a U.S.  tax-free  distribution of
  Unisource stock to Company shareholders on December 31, 1996. As a result of the
  spin off of Unisource, the Company has accounted for Unisource as a discontinued
  operation.  Continuing  operations of the Company consist of IKON,  which sells,
  rents and leases  photocopiers,  digital  printers  and other  automated  office
  equipment for use in both traditional and integrated office  environments.  IKON
  also provides  outsourcing and imaging services and offers  consulting,  design,
  computer   networking   and  technology   training  for  the  networked   office
  environment.  On January 23, 1997,  shareholders  of the Company voted to change
  the name of the Company from Alco Standard Corporation to IKON Office Solutions,
  Inc.
  
                                Results of Operations
  
           The  discussion  of the results of  operations  reviews the  continuing
  operations of the Company as contained in the Consolidated Statements of Income.
  
                      Three and Nine Months Ended June 30, 1997
             Compared with the Three and Nine Months Ended June 30, 1996
  
           Revenues and income before taxes for the third quarter and year-to-date
  of fiscal 1997  compared to the third  quarter and  year-to-date  of fiscal 1996
  were as follows:
  <TABLE>
  <CAPTION>
                                                     Three Months Ended                    Nine Months Ended
                                                          June 30         %                    June  30          %
                                                 1997        1996        Change         1997       1996         Change
  <S>                                          <C>         <C>           <C>          <C>        <C>          <C>  
  (in millions)
  REVENUES                                     $1,316      $1,059        24.3%        $3,735     $2,975       25.5%
                                               ======      ======                     ======     ======
  
  INCOME BEFORE TAXES:
  Operating income, excluding
     transformation costs                       $87.7       $87.8        (0.1%)       $286.3     $238.2       20.2%
  Transformation costs                          (23.0)       (5.6)                     (98.5)     (11.9)
                                                ------       -----                     -----      -----
        Operating income                         64.7        82.2                      187.8      226.3
  Interest expense                              (12.1)       (9.4)                     (31.9)     (26.0)
                                                ------       -----                     -----      -----
                                                $52.6       $72.8       (27.7%)       $155.9     $200.3      (22.2%)
                                                =====       =====                     ======     ======
  </TABLE>
  
  
  THIRD QUARTER:
           The Company's third quarter revenues  increased $257 million,  or 24.3%
  over the third quarter of fiscal 1996, of which $153 million  relates to current
  and prior year acquisitions and $104 million to base companies' internal growth.
  The Company's  worldwide internal revenue growth was 10% in the third quarter of
  fiscal 1997 compared to 12% in the second  quarter of fiscal 1997.  The internal
  revenue  growth rate was lower than  expected as a result of  short-term  issues
  related to the acceleration of the Company's  transformation  initiative and its
  impact on  operations  both in the U.S.  and U.K.  Revenues  from the  Company's
  operations  outside the U.S.  were $169 million for the third  quarter of fiscal
  1997 compared to $135 million for the same period of the prior fiscal year.  The
  Company's European  operations  accounted for $6 million of the increase,  which
  consisted  of  revenue  declines  in the U.K.  of $8  million  offset by revenue
  increases in other European  operations,  while Canadian revenues  increased $24
  million as a result of acquisitions  and internal  growth in base  companies.  A
  fiscal 1996 Mexican acquisition added $4 million of revenue to the third quarter
  of fiscal 1997.
  
  <PAGE>
  
           The Company's  operating  income decreased by $17.5 million compared to
  the prior year's quarter.  However,  excluding  transformation costs,  operating
  income was  essentially  flat at $87.7  million for the third  quarter of fiscal
  1997 compared to $87.8 million in the prior year. Operating income for the third
  quarter was lower than expected due to: 1) lower sales  productivity  in certain
  copier  marketplaces  as a  result  of  the  transformation  initiative,  and 2)
  increased operating expenses resulting from the transformation process.  Finance
  subsidiaries   contributed  18.3%  of  the  Company's  operating  income  before
  transformation  costs in the third  quarter of fiscal 1997  compared to 13.3% in
  the third quarter of fiscal 1996. The Company's  operating  margins were 4.9% in
  the third  quarter of fiscal 1997,  compared to 7.8% in fiscal  1996.  Excluding
  transformation  costs,  the Company's  operating  margins were 6.7% in the third
  quarter of fiscal 1997, compared to 8.3% in the third quarter of fiscal 1996.
  
           Costs associated with the Company's  transformation  program  increased
  $17.3  million in the third quarter of fiscal 1997 compared to the third quarter
  of  fiscal  1996,  primarily  relating  to  employee  severance  agreements  ($5
  million), temporary labor ($2 million) and facility consolidations ($5 million).
  
           Operating  income from  foreign  operations  was $12.8  million for the
  three  months  ended  June 30,  1997,  down $.5  million  from the prior  year's
  quarter.  European  operations posted a $2.0 million decline in operating income
  in the third quarter,  relating primarily to revenue declines in the U.K., while
  Canadian operating income increased $1.4 million and the Mexican operation added
  $.1 million of operating  income in the third quarter of fiscal 1997.  There was
  no material effect of foreign currency exchange rate fluctuations on the results
  of  operations in the third quarter of fiscal 1997 compared to the third quarter
  of fiscal 1996.
  
  
  NINE MONTHS:
           The Company's nine month revenues increased $760 million, or 25.5% over
  the first nine months of fiscal 1996,  of which $408 million  relates to current
  and prior year acquisitions and $352 million to base companies' internal growth.
  The Company's worldwide internal revenue growth was 12% in the first nine months
  of fiscal 1997.  Revenues  from the Company's  operations  outside the U.S. were
  $483  million for the first nine months of fiscal 1997  compared to $393 million
  for the same period of the prior fiscal year. The Company's European  operations
  accounted for $9 million of the increase, which consisted of revenue declines in
  the  U.K.  of  $36  million  offset  by  revenue  increases  in  other  European
  operations,  while  Canadian  revenues  increased  $71  million  as a result  of
  acquisitions  and internal  growth in base companies and the fiscal 1996 Mexican
  acquisition  added $10  million of  revenue  to the first nine  months of fiscal
  1997.
  
           Transformation  costs increased $86.6 million for the nine months ended
  June 30, 1997 compared to the prior year, and was primarily due to the write-off
  of costs associated with the SAP computer platform that was abandoned during the
  second  quarter ($28  million),  employee  severance  agreements  ($12 million),
  outside  consultants  ($2  million),  temporary  labor  ($8  million),  facility
  consolidations  ($13 million) and costs incurred in connection with the adoption
  of the IKON name worldwide ($10 million).
  
           The Company's  operating  income decreased by $38.5 million compared to
  the prior year's first nine months.  Excluding  transformation costs,  operating
  income increased 20.2% in the first nine months of fiscal 1997 to $286.3 million
  from  $238.2  million  in  the  first  nine  months  of  fiscal  1996.   Finance
  subsidiaries   contributed  15.5%  of  the  Company's  operating  income  before
  transformation  costs in the first nine months of fiscal 1997  compared to 12.2%
  in the first nine months of fiscal 1996.  The Company's  operating  margins were
  5.0% in the first nine months of fiscal  1997,  compared to 7.6% in fiscal 1996.
  Excluding  transformation costs,  operating margins were 7.7% for the first nine
  months of fiscal 1997 compared to 8.0% in the first nine months of fiscal 1996.
  
           Operating income from foreign operations was $34.9 million for the nine
  months ended June 30,  1997,  down $4.3 million from the prior year's first nine
  months. European operations posted a $9.0 million decline in operating income in
  the first nine months of fiscal 1997,  relating primarily to revenue declines in
  the U.K.  Canadian  operating income increased $4.6 million and a fourth quarter
  fiscal 1996 Mexican acquisition added $.1 million of operating income. There was
  no material effect of foreign currency exchange rate fluctuations on the results
  of operations in the first nine months of fiscal 1997 compared to the first nine
  months of fiscal 1996.
  <PAGE>
  
  Acquisitions
           In  the  third  quarter  of  fiscal  1997,  the  Company  completed  17
  acquisitions,  bringing  total  year-to-date  acquisitions  to  64.  Of  the  17
  companies  acquired,  seven were  outsourcing and imaging  companies,  four were
  systems  integration  companies and six were traditional copier companies.  This
  year,  as  part  of its  total  solutions  strategy,  IKON  has  emphasized  the
  acquisition  of  systems  integration  and  outsourcing  companies  to build its
  capabilities in these areas.
  
  Other
           Interest expense  increased $2.7 million in the third quarter of fiscal
  1997, and $5.9 million year-to-date. The increased expense is due to higher debt
  levels  in  fiscal  1997  when  adjusted  for the  Unisource  intercompany  debt
  repayment made in December 1996.
  
           Income before taxes decreased by $20.1 million in the third quarter and
  $44.4  million  year-to-date  over the  prior  year,  primarily  reflecting  the
  combined  result of internal  growth from base  companies,  along with  earnings
  contributed by acquisitions, net of increased transformation and interest costs.
  The effective income tax rate  year-to-date is 42.7% compared with 39.6% for the
  comparative period in fiscal 1996.
  
           The Company recorded an extraordinary charge of $12.2 million after tax
  in the first  quarter of fiscal  1997  relating to its early  extinguishment  of
  certain  corporate  debt.  The Company  used the  proceeds of a December 2, 1996
  $553.5 million  intercompany  debt repayment  from its  discontinued  operation,
  Unisource,  to prepay $514 million of corporate debt. The pretax charge of $18.7
  million  is primarily for prepayment  penalties and has a related tax benefit of
  $6.5 million.
  
           Earnings per share from continuing  operations  decreased from $.30 per
  share  for the  third  quarter  of  fiscal  1996 to $.19 per share for the third
  quarter of fiscal 1997. Excluding  transformation costs, earnings per share from
  continuing  operations  decreased 6.3% from $.32 per share for the third quarter
  of fiscal 1996 to $.30 per share in the third quarter of fiscal 1997.  Including
  a loss from discontinued operations, earnings per share of the Company were $.14
  for the third quarter ended June 30, 1996. Year-to-date, earnings per share from
  continuing operations,  excluding the extraordinary charge,  decreased from $.82
  per  share for the first  nine  months of fiscal  1996 to $.56 per share for the
  first nine months of fiscal 1997. Excluding  transformation  costs, earnings per
  share from continuing  operations would have increased 17.0% from $.88 per share
  for the first nine  months of fiscal  1996 to $1.03 per share for the first nine
  months of fiscal 1997. Including the loss per share of $.09 on the extraordinary
  charge and the earnings per share of $.15 on discontinued  operations,  earnings
  per share of the  Company  were $.62 for the nine  months  ended  June 30,  1997
  compared to $1.10 (which includes $.28 for discontinued operations) for the nine
  months ended June 30, 1996.
  
           Weighted average shares of 133.6 million for the quarter ended June 30,
  1997 were 2.6  million  shares  greater  than the 131.0  million for the quarter
  ended June 30, 1996,  primarily the result of stock issued for acquisitions (6.1
  million weighted average shares), net of treasury share repurchases (3.7 million
  weighted shares).
  
  <PAGE>
  
                          Financial Condition and Liquidity
  
           Net cash provided by operating activities of continuing  operations for
  the first nine months of fiscal 1997 was $4 million, primarily the result of net
  income from continuing  operations before the  extraordinary  loss, plus noncash
  charges to income,  offset by  increases  in  working  capital.  During the same
  period,  the Company used $876 million in cash for investing  activities,  which
  included finance subsidiary activity of $614 million,  acquisition activity at a
  cash cost of $129 million and capital  expenditures  of $129 million.  Investing
  activities were funded primarily through financing activities.  Cash provided by
  financing  activities  included  $554  million of  intercompany  debt  repaid by
  Unisource  which was used primarily to prepay  corporate debt of the Company and
  $538  million of  additional  net funding for  finance  subsidiaries.  Financing
  activities  also  included $112 million use of cash for the purchase of treasury
  shares. Debt, excluding finance subsidiaries, was $824 million at June 30, 1997,
  a decrease  of $147  million  from the  continuing  operations  debt  balance at
  September 30, 1996 of $971 million.  The debt to capital ratio was 36.4% at June
  30, 1997  compared to 31.4% at  September  30, 1996 and 29.3% at March 31, 1997.
  The  increased  debt to capital ratio at the end of June reflects the effects of
  higher working capital,  which the Company is currently managing to lower levels
  as the transformation proceeds, and the share repurchase program.
  
           On December 16, 1996, the Company entered into a credit  agreement with
  several banks under which it may borrow up to $400 million. This credit facility
  replaces a $500 million credit  facility  which was due to expire  December 1999
  and a $100 million  credit  facility which was canceled on December 2, 1996. The
  reduced credit commitment  reflects the spin-off of the Unisource business which
  was  effective  December 31, 1996.  As of June 30, 1997,  short-term  borrowings
  totaled $256  million,  leaving $144  million  available  under the $400 million
  credit facility. The Company also has $450 million available for either stock or
  debt offerings under its shelf registration statement filed November 1995.
  
           Finance subsidiaries debt grew by $538 million from September 30, 1996,
  a result of increased  leasing  activity.  During the nine months ended June 30,
  1997,  IKON Capital  issued an  additional  $632 million  under its $3.5 billion
  medium  term notes  program  which began in July 1994  (including  the new shelf
  registration filed in May 1997 for $2 billion of medium term notes). At June 30,
  1997,  $1.5  billion  of medium  term  notes  were  outstanding  with a weighted
  interest rate of 6.7%,  leaving $1.9 billion  available under this program.  The
  new  registration  statement has essentially the same provisions as the existing
  program. Under its $275 million asset securitization programs, IKON Capital sold
  $77.3 million in direct  financing leases during the first nine months of fiscal
  1997, replacing those leases liquidated and leaving the amount of contracts sold
  unchanged.
  
           The Company filed shelf  registrations  for 10 million shares of common
  stock in January 1996 and 5 million  shares of common stock in March 1996. A new
  shelf  registration  was filed on April 10,  1997 for an  additional  10 million
  shares.  Shares issued under these  registration  statements  are being used for
  acquisitions.  Approximately  13.3  million  shares have been issued under these
  shelf registrations through June 30, 1997, leaving 11.7 million shares available
  for issuance.
  
           On April 17, 1997, the Company  announced  that it may repurchase  from
  time to time as much as five  percent of the  outstanding  IKON common  stock in
  open market  transactions.  Through June 30, 1997, the Company  repurchased  4.4
  million common shares for $109.7 million.  Approximately  2.3 million shares may
  still be acquired by the Company in open market transactions under this program.
  
           The Company  believes that its operating cash flow together with unused
  bank credit  facilities and other financing  arrangements  will be sufficient to
  finance  current  operating   requirements   including   capital   expenditures,
  acquisitions,  dividends,  stock  repurchases  and  costs  associated  with  the
  Company's  transformation  program.  The Company  estimates the total  remaining
  costs of its  transformation  program to be from $70  million  to $100  million,
  excluding capital costs of $90 million to $100 million. Quarterly transformation
  costs are  expected to be in the range of $5 million to $30 million for the next
  five quarters.
  <PAGE>
                             Forward-looking Information
  
           This document contains, and other materials filed or to be filed by the
  Company with the Commission which are incorporated by reference  herein, as well
  as information  included in oral statements or other written  statements made or
  to be made by the Company, contain or will contain or include, disclosures which
  are  forward-looking  statements  within  the  meaning  of  Section  27A  of the
  Securities  Act of 1933,  as amended,  and Section 21E of the 1934 Exchange Act.
  Such  forward-looking   statements  address,   among  other  things,   strategic
  initiatives  (including  plans for enhancing the Company's  business through new
  acquisitions,  information technology systems,  sales strategies,  market growth
  plans,  margin  enhancement  initiatives,  capital  expenditures  and  financing
  sources).  Such  forward-looking  information is based upon management's current
  plans or expectations and is subject to a number of uncertainties and risks that
  could significantly affect current plans,  anticipated actions and the Company's
  future financial  condition and results.  These uncertainties and risks include,
  but are not limited to, those  relating to  successfully  managing an aggressive
  program to  acquire  and  integrate  new  companies,  including  companies  with
  technical services and products that are relatively new to the Company, and also
  including companies outside the U.S., which present additional risks relating to
  international  operations;   risks  and  uncertainties  relating  to  conducting
  operations in a competitive  environment;  delays,  difficulties,  technological
  changes,   management  transitions  and  employment  issues  associated  with  a
  large-scale   transformation   project;  debt  service  requirements  (including
  sensitivity to fluctuations in interest rates); and general economic conditions.
  As a  consequence,  current  plans,  anticipated  actions  and future  financial
  condition  and results may differ from those  expressed  in any  forward-looking
  statements made by or on behalf of the Company.
  
  <PAGE>
  
                             PART II. OTHER INFORMATION
  
  Item 6.  Exhibits and Reports on Form 8-K
  
           (a)   The following Exhibits are furnished pursuant to Item 601 of
                 Regulation S-K:
  
  
                 Exhibit No. (11) Computations of Earnings per Share
  
                 Exhibit No. (27) Financial Data Schedule
  
           (b)   Reports on Form 8-K
  
                 On April 18, 1997, the registrant  filed a Current Report on Form
                 8-K to file,  under  Item 5 of the  form,  the  earnings  for the
                 fiscal quarter ended March 31, 1997, the  announcement of certain
                 management  changes,  and the announcement that it may repurchase
                 from time to time as much as 5 percent of its outstanding  shares
                 in open market transactions.
  
                 On April 24, 1997, the registrant  filed a Current Report on Form
                 8-K to file,  under Item 5 of the form, a Press  Release  stating
                 that it was unaware of any reason its stock,  which  recently had
                 traded down sharply,  should be under pressure. The Press Release
                 also stated  that IKON's  business is strong and that the Company
                 knows of no  material  developments  concerning  its  business or
                 financial statements which have not been publicly disclosed.
  
                 On June 19, 1997, the  registrant  filed a Current Report on Form
                 8-K to file,  under Item 5 of the form, a summary  description of
                 its  amended  Rights  Agreement  which was adopted as of June 18,
                 1997, and which amends the previous  agreement that was scheduled
                 to  expire  on  February  10,  1998.  A copy of the  amended  and
                 restated Rights Agreement dated as of June 18, 1997, was filed as
                 Exhibit 4.1 on Item 7(c) of the form.
  
                 On June 25, 1997, the  registrant  filed a Current Report on Form
                 8-K to file, under Item 5 of the form, a Press Release announcing
                 that earnings for the third quarter ending June 30, 1997 would be
                 lower than  expected,  due to  short-term  issues  related to the
                 acceleration of its business transformation process.
  
                 On July 17, 1997, the  registrant  filed a Current Report on Form
                 8-K to file,  under  Item 5 of the  form,  the  earnings  for the
                 fiscal quarter ended June 30, 1997.
  
  
  
  <PAGE>
  
                                     SIGNATURES
  
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned,  thereunto duly authorized. This report has also been signed by the
  undersigned in his capacity as the chief accounting officer of the Registrant.
  
  
                                           IKON OFFICE SOLUTIONS, INC.
  
  
  Date  August 12, 1997                    /s/ Michael J. Dillon
                                           Michael J. Dillon
                                           Vice President and Controller
                                           (Chief Accounting Officer)
  
  
  
  <PAGE>
  
                                  INDEX TO EXHIBITS
  
  Exhibit Number
  
  
           (11)       Computations of Earnings per Share
  
           (27)       Financial Data Schedule
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 53171}]
metadata_filer: {"company-data": {"conformed-name": "IKON OFFICE SOLUTIONS INC", "cik": "0000003370", "assigned-sic": "5045", "irs-number": "230334400", "state-of-incorporation": "OH", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "001-05964", "film-number": "97656787"}, "business-address": {"street1": "P O BOX 834", "city": "VALLEY FORGE", "state": "PA", "zip": "19482", "phone": "2152968000"}, "mail-address": {"street1": "BOX 834", "city": "VALLEY FORGE", "state": "PA", "zip": "19482"}, "former-company": [{"former-conformed-name": "ALCO STANDARD CORP", "date-changed": "19920703"}, {"former-conformed-name": "ALCO CHEMICAL CORP", "date-changed": "19680218"}]}
text: SECURITIES AND EXCHANGE COMMISSION
  
                               Washington, D. C. 20549
  
                                      Form 10-Q
  
  (Mark One)*
  
  [X] Quarterly report pursuant to section 13 or 15(d) of the Securities  Exchange
  Act of 1934 for the  quarterly  period  ended  June 30,  1997 or [ ]  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. Employer
  incorporation or organization)                        Identification No.)
  
                  P. O. Box 834, Valley Forge, Pennsylvania 19482
                      (Address of principal executive offices)
                                     (Zip Code)
  
                                   (610) 296-8000
                (Registrant's telephone number, including area code)
  
                                        NONE
  (Former  name,  former  address and former  fiscal year,  if changed  since last
  report)
  
  Indicate by check mark whether the registrant (1) has filed all reports required
  to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
  the  preceding 12 months (or for such  shorter  period that the  registrant  was
  required  to file  such  reports),  and  (2) has  been  subject  to such  filing
  requirements for the past 90 days.
  
  Yes    X    No
  
  *  Applicable  only to issuers  involved in  bankruptcy  proceedings  during the
  preceding five years:
  
  Indicate  by check mark  whether  the  registrant  has filed all  documents  and
  reports  required  to be filed by  Sections  12,  13 or 15(d) of the  Securities
  Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
  confirmed by a court.
  
  Yes         No
  
  * Applicable only to corporate issuers:
  
  Indicate the number of shares  outstanding  of each of the  issuer's  classes of
  common stock, as of July 31, 1997.
  
  Common Stock, no par value                               132,830,027 shares
  INDEX
  
                             IKON OFFICE SOLUTIONS, INC.
  
  PART I.  FINANCIAL INFORMATION
  
       Item 1.             Financial Statements (Unaudited)
  
                           Consolidated Balance Sheets--June 30, 1997
                           and September 30, 1996
  
                           Consolidated  Statements of Income--Three  months ended
                           June 30, 1997 and June 30,  1996 and Nine months  ended
                           June 30, 1997 and June 30, 1996
  
                           Consolidated  Statements  of  Cash  Flows--Nine  months
                           ended June 30, 1997 and June 30, 1996
  
                           Notes to Consolidated Financial Statements--
                           June 30, 1997
  
       Item 2.             Management's Discussion and Analysis of Results
                           of Operations and Financial Condition and Liquidity
  
  PART II.  OTHER INFORMATION
  
      Item 6.              Exhibits and Reports on Form 8-K
  
  SIGNATURES
  PART I. FINANCIAL INFORMATION
  
  Item 1: Financial Statements (unaudited)
  
                             IKON OFFICE SOLUTIONS, INC.
                             CONSOLIDATED BALANCE SHEETS
                                  ( in thousands )
  June 30     September 30
  ASSETS                                                            1997            1996
  Current Assets
                 Cash                                              $24,664        $46,056
                 Accounts receivable, net                          722,843        513,378
                 Finance receivables, net                          618,579        435,434
                 Inventories                                       468,448        350,774
                 Prepaid expenses                                  113,068         80,352
                 Deferred taxes                                     96,133         83,161
                                                                ----------     ----------
                 Total current assets                            2,043,735      1,509,155
                                                                ----------     ----------
  
            Investments and Long-Term Receivables                   21,167         48,165
  
            Long-Term Finance Receivables, net                   1,220,914        878,324
  
            Equipment on Operating Leases, net                      97,630         95,043
  
            Property and Equipment, at cost                        416,500        358,234
                 Less accumulated depreciation                     207,624        169,416
                                                                ----------     ----------
                                                                   208,876        188,818
                                                                ----------     ----------
  
            Other Assets
                 Goodwill                                        1,319,058      1,087,210
                 Miscellaneous                                     144,838         88,679
                                                                ----------     ----------
                                                                 1,463,896      1,175,889
                                                                ----------     ----------
  
            Net Assets of Discontinued Operations                               1,489,201
                                                                ----------     ----------
  
                                                                $5,056,218     $5,384,595
                                                                ==========     ==========
  See notes to consolidated financial statements.
  IKON OFFICE SOLUTIONS, INC.
                             CONSOLIDATED BALANCE SHEETS
                                  ( in thousands )
  June 30         September 30
  LIABILITIES AND SHAREHOLDERS' EQUITY                                 1997              1996
  Current Liabilities
      Current portion of long-term debt                               $58,784          $62,697
      Current portion of long-term debt, finance subsidiaries         375,737          314,000
      Notes payable                                                   273,532          186,462
      Trade accounts payable                                          189,502          123,571
      Accrued salaries, wages and commissions                         100,051          101,632
      Deferred revenues                                               205,580          200,225
      Other accrued expenses                                          242,922          269,400
                                                                  -----------      -----------
      Total current liabilities                                     1,446,108        1,257,987
                                                                  -----------      -----------
  
  Long-Term Debt                                                      491,293          721,923
  
  Long-Term Debt, Finance Subsidiaries                              1,289,504          813,026
  
  Deferred Taxes                                                      259,278          191,272
  
  Other Long-Term Liabilities                                         132,315          144,883
  
  Shareholders' Equity
      Series BB conversion preferred stock, no par value:
          3,877 depositary shares issued and outstanding              290,170          290,170
      Common stock, no par value:
          Authorized 300,000 shares
          Issued 6/97 -135,705 shares; 9/96 - 131,930 shares          670,908        1,305,413
      Retained earnings                                               559,986          701,771
      Foreign currency translation adjustment                          (2,135)         (25,187)
      Cost of common shares in treasury: 6/97 - 3,230 shares;
          9/96 - 374 shares                                           (81,209)         (16,663)
                                                                  -----------      -----------
                                                                    1,437,720        2,255,504
                                                                  -----------      -----------
  
                                                                   $5,056,218       $5,384,595
                                                                  ===========      ===========
  See notes to consolidated financial statements.
  IKON OFFICE SOLUTIONS, INC.
                          CONSOLIDATED STATEMENTS OF INCOME
                      (in thousands, except earnings per share)
  Three Months Ended                Nine Months Ended
                                                                June 30                          June 30
                                                         1997              1996           1997             1996
  Revenues
  Net sales                                             $751,481         $615,245      $2,134,861      $1,715,263
  Service and rentals                                    505,375          403,794       1,439,528       1,152,285
  Finance income                                          59,450           40,086         160,211         107,517
                                                     -----------      -----------     -----------     -----------
                                                       1,316,306        1,059,125       3,734,600       2,975,065
                                                     -----------      -----------     -----------     -----------
  
  Costs and Expenses
  Cost of goods sold                                     475,897          387,266       1,350,623       1,114,398
  Service and rental costs                               251,838          194,553         707,288         552,290
  Finance interest expense                                26,350           17,334          69,731          48,073
  Selling and administrative                             474,541          372,148       1,320,619       1,022,093
  Transformation costs                                    22,961            5,628          98,494          11,931
                                                     -----------      -----------     -----------     -----------
                                                       1,251,587          976,929       3,546,755       2,748,785
                                                     -----------      -----------     -----------     -----------
  
  Operating income                                        64,719           82,196         187,845         226,280
  Interest expense                                        12,089            9,435          31,895          25,942
                                                     -----------      -----------     -----------     -----------
  Income from continuing operations before taxes
      and extraordinary loss                              52,630           72,761         155,950         200,338
  Taxes on income                                         22,502           29,105          66,548          79,259
                                                     -----------      -----------     -----------     -----------
  Income from continuing operations before
       extraordinary loss                                 30,128           43,656          89,402         121,079
  
  Discontinued operations                                                 (20,143)         20,151          34,717
                                                     -----------      -----------     -----------     -----------
  Income before extraordinary loss                        30,128           23,513         109,553         155,796
  Extraordinary loss from early extinguishment
       of debt, net of tax benefit                                                        (12,156)
                                                     -----------      -----------     -----------     -----------
  
  Net Income                                              30,128           23,513          97,397         155,796
  Less:  Preferred Dividends                               4,885            4,885          14,655          17,434
                                                     -----------      -----------     -----------     -----------
  Available to Common Shareholders                       $25,243          $18,628         $82,742        $138,362
                                                     ===========      ===========     ===========     ===========
  
  Earnings (Loss) Per Share (1)
  Continuing Operations                                    $0.19            $0.30           $0.56           $0.82
  Discontinued Operations                                                  $(0.16)          $0.15           $0.28
  Extraordinary loss                                                                       $(0.09)
                                                     -----------      -----------     -----------     -----------
                                                           $0.19            $0.14           $0.62           $1.10
                                                     ===========      ===========     ===========     ===========
  (1)  See Exhibit 11 for computation of earnings per share.
  
  See notes to consolidated financial statements.
  IKON OFFICE SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (in thousands)
  Nine Months Ended
                                                                                       June 30
                                                                                1997             1996
  Operating Activities
  Income from continuing operations before extraordinary loss              $89,402         $121,079
      Additions (deductions) to reconcile income from continuing
          operations before extraordinary loss to net cash
          provided by operating activities of continuing operations
             Depreciation                                                       77,335           58,775
             Amortization                                                       34,737           23,571
             Provisions for losses on accounts receivable                       18,385           12,594
             Provision for deferred taxes                                       58,000           50,817
             Writeoff of assets related to transformation                       24,183
             Changes in  operating  assets and  liabilities,  net
                of effects  from acquisitions and divestitures:
                   Increase in accounts receivable                            (175,078)         (70,670)
                   Increase in inventories                                    (105,960)         (44,473)
                   Increase in prepaid expenses                                (34,241)         (61,528)
                   Increase in accounts payable, deferred
                       revenues and accrued expenses                             7,162           68,869
             Miscellaneous                                                      10,453           (3,782)
                                                                           -----------      -----------
  Net cash provided by operating activities of continuing operations             4,378          155,252
  Net cash provided by operating activities of
      discontinued operations                                                   24,174          132,965
                                                                           -----------      -----------
  Net cash provided by operating activities                                     28,552          288,217
  
  Investing activities
      Proceeds from the sale of property and equipment                          25,878           29,163
      Payments made on long-term liabilities                                   (19,501)
      Cost of companies acquired, net of cash acquired                        (128,772)        (123,733)
      Expenditures for property and equipment                                 (128,630)         (85,782)
      Purchase of miscellaneous assets                                         (10,585)         (15,891)
      Finance subsidiaries receivables - additions                          (1,092,435)        (691,842)
      Finance subsidiaries receivables - collections                           477,994          282,967
                                                                           -----------      -----------
  Net cash used in investing activities of continuing operations              (876,051)        (605,118)
  Net cash used in investing activities of discontinued operations             (38,058)        (237,241)
                                                                           -----------      -----------
  Net cash used in investing activities                                       (914,109)        (842,359)
  
  Financing activities
      Proceeds from short-term borrowings, net                                  84,210            5,023
      Proceeds from issuance of long-term debt                                  36,662          429,522
      Proceeds from option exercises and sale of treasury shares                39,348           46,053
      Proceeds from sale of finance subsidiaries lease receivables              77,251           39,571
      Proceeds from (payments to) discontinued operations                      553,700         (152,427)
      Long-term debt repayments                                               (322,971)        (100,473)
      Finance subsidiaries debt - additions                                    697,215          439,743
      Finance subsidiaries debt - repayments                                  (159,000)        (121,232)
      Dividends paid                                                           (43,978)         (68,630)
      Purchase of treasury shares                                             (112,154)         (59,512)
                                                                           -----------      -----------
  Net cash provided by financing activities of continuing operations           850,283          457,638
  Net cash provided by financing activities of discontinued operations          13,882          104,276
                                                                           -----------      -----------
  Net cash provided by financing activities                                    864,165          561,914
                                                                           -----------      -----------
  
  Net (decrease) increase in cash                                              (21,392)           7,772
  Cash at beginning of year                                                     46,056           66,413
                                                                           -----------      -----------
  Cash at end of period                                                        $24,664          $74,185
                                                                           ===========      ===========
  See notes to consolidated financial statements.
  IKON OFFICE SOLUTIONS, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    JUNE 30, 1997
  
  Note 1:  Basis of Presentation
  
           The accompanying  unaudited condensed consolidated financial statements
  have been prepared in accordance with generally accepted  accounting  principles
  for interim  financial  information  and the  instructions to Form 10-Q and Rule
  10-01  of  Regulation  S-X.  In  the  opinion  of  management,  all  adjustments
  (consisting  of  normal  recurring  accruals)  considered  necessary  for a fair
  presentation  have  been  included.  For  further  information,   refer  to  the
  consolidated   financial  statements  and  footnotes  thereto  included  in  the
  Company's  annual  report on Form 10-K for the year ended  September  30,  1996.
  Certain  prior year amounts have been  reclassified  to conform with the current
  year presentation.
  
  Note 2:  Debt
  
              On December 16, 1996,  the Company  entered into a credit  agreement
  with  several  banks  under  which  it  may  borrow  up to  $400  million.  This
  multicurrency  facility replaces a $500 million credit facility which was due to
  expire December 1, 1999 and a $100 million credit facility which was canceled on
  December 2, 1996.  The reduced  credit  commitment  reflects the spin-off of the
  Unisource  business which was effective  December 31, 1996 (see note 3). The new
  agreement,  which expires December 15, 2001,  includes a facility fee of 8 basis
  points per annum on the commitment,  based upon the Company's  current long-term
  debt rating. The agreement provides that loans may be made under either domestic
  or  Eurocurrency  notes at rates  computed  under a selection  of rate  formulas
  including prime or Eurocurrency rates.
  
  Note 3: Discontinued Operations and Spin-off
  
           On  June  19,  1996,  the  Company  announced  that it  would  separate
  Unisource  Worldwide,  Inc.  ("Unisource"),  its printing and imaging and supply
  systems  distribution  business from IKON Office Solutions,  Inc. ("IKON"),  its
  office  solutions  business,  with each  business  operating  as a  stand-alone,
  publicly traded company.  In order to effect the separation of these businesses,
  the  Company  declared  a dividend  payable to holders of record of Alco  common
  stock at the  close of  business  on  December  13,  1996 of one share of common
  stock, $.001 par value, of Unisource for every two shares of Alco stock owned on
  December 13, 1996. The distribution  resulted in 100% of the outstanding  shares
  of Unisource common stock being distributed to Alco shareholders by December 31,
  1996.  The Company has accounted for Unisource as a  discontinued  operation for
  all periods  presented in these  financial  statements.  The Company  recorded a
  charge  against  earnings of $50 million in the third quarter of fiscal 1996 for
  restructuring  activities  at  Unisource.  In  addition,  an $18 million  charge
  against  earnings  was  recorded  in the third  quarter of fiscal 1996 for costs
  associated with the disposition of Unisource  consisting primarily of investment
  banking fees,  legal and accounting fees,  filing fees and employee  termination
  costs  directly  related  to the  spin-off.  Prior year  amounts  have also been
  restated to reflect the  allocation  of corporate  interest and other  corporate
  expenses to the discontinued operations of the Company.
  IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1997
  
  Note 3: Discontinued Operations and Spin-off (Continued)
  
           The  results of  discontinued  operations,  included  in the  Company's
  results of operations through December 31, 1996, are as follows (in thousands):
  
                                Three Months Ended        Nine Months Ended
                                     June 30                  June 30
                                      1996              1997           1996
  
  Revenues                         $1,748,732       $1,728,533      $5,211,718
                                  ===========      ===========     ===========
  
  Income (loss) before taxes
    (including $50 million
     restructuring charge and
     $18 million disposition
     charge in 1996)                 $(23,821)         $34,743         $66,574
  Tax expense (benefit)                (3,678)          14,592          31,857
                                  -----------      -----------     -----------
  Net income  (loss)                 $(20,143)         $20,151         $34,717
                                  ===========      ===========     ===========
  
           The unusual effective tax rates of 15.4% and 47.9% for the three months
  and nine months ended June 30, 1996,  respectively,  result  primarily  from the
  impact of certain  nondeductible  components of the disposition  charge.  Absent
  such impact,  the estimated  effective tax rate for Unisource was  approximately
  39.5%.
  
           The net  carrying  value at  September  30,  1996 of the  assets  to be
    distributed to shareholders consisted of (in thousands):
  
            Working capital                               $750,792
            Net property and equipment                     224,168
            Other assets                                   637,062
            Long-term debt and other liabilities          (122,821)
                                                       -----------
            Unisource equity and intercompany debt      $1,489,201
                                                       ===========
  
           In December 1996,  Unisource repaid $553.5 million of intercompany debt
  outstanding  with the Company and the Unisource  stock was  distributed  to Alco
  shareholders. Equity of the Company was reduced by $952.3 million, which was the
  equity of Unisource at December 31, 1996.
  
  Note 4:  Extraordinary Loss on Early Extinguishment of Debt
  
           On December 2, 1996,  Unisource  borrowed under its new credit facility
  to repay  $553.5  million of  intercompany  debt with the  Company.  The Company
  prepaid debt in the amount of $514 million from these funds.  Early repayment of
  this debt resulted in certain prepayment  penalties.  Total prepayment penalties
  of $18.7  million and related tax benefits of $6.5  million are  reflected as an
  extraordinary  loss on early  extinguishment  of debt on the Statement of Income
  for the nine months ended June 30, 1997.
  
  Note 5:  Name Change
  
           At their annual meeting on January 23, 1997, the shareholders  voted to
  change the name of the Company  from Alco  Standard  Corporation  to IKON Office
  Solutions,  Inc., the name previously used by Alco's  remaining  operating unit.
  The name change was effective  immediately  and the Company's  ticker symbol was
  changed from ASN to IKN effective January 27, 1997.
  IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1997
  
  Note 6:  Transformation Costs
  
           At the end of fiscal 1995,  the Company  announced  its  transformation
  program to change its organization into a more cohesive and efficient network by
  building a uniform information technology system and implementing best practices
  for critically important management functions throughout the IKON companies.  In
  March 1997, the Company  announced that it was accelerating  the  transformation
  program.  As a result, the Company began to separately disclose these costs as a
  component of operating  expenses on the Statement of Income. The Company expects
  to  complete  the  transformation  program  by  the  end  of  fiscal  1998.  The
  transformation  involves a variety of activities which the Company believes will
  significantly lower administrative  costs and improve margins.  These activities
  include  consolidating  purchasing,   inventory  control,  logistics  and  other
  activities into thirteen  customer  service centers in the U.S.,  establishing a
  single financial  processing center,  building a common  information  technology
  system, adopting a common name and creating marketplace-focused field operations
  with  greater  attention  to  customer  sales and  services.  Costs  charged  to
  transformation  expense relate principally to the write off of the abandoned SAP
  computer platform,  severance and other employee related costs, costs related to
  consultants  assisting with the transformation,  facility  consolidation  costs,
  including  lease  buyouts and  write-offs of leasehold  improvements,  and costs
  incurred in connection with the adoption of the IKON name worldwide.
  
  Note 7:  Pending Accounting Change
  
           In  February  1997,  the FASB  issued  Statement  No.  128  (FAS  128),
  "Earnings Per Share",  which simplifies the standards for computing earnings per
  share (EPS). It replaces the  presentation of primary EPS with the  presentation
  of basic and  diluted  EPS.  It also  requires  dual  presentation  of basic and
  diluted EPS. FAS 128 is effective  for financial  statements  issued for periods
  ending after  December 15,  1997.  Earlier  application  is not  permitted.  The
  Company  does not  believe  the  effect  of  adoption  will be  material  on EPS
  previously presented.
  Item 2:  Management's  Discussion  and  Analysis  of Results of  Operations  and
  Financial Condition and Liquidity
  
           On June 19,  1996,  the Company  announced  that it would split its two
  operating units into independent companies by spinning off Unisource,  its paper
  and supply systems distribution group, as a separate publicly owned company. The
  Company  accomplished the transaction  through a U.S.  tax-free  distribution of
  Unisource stock to Company shareholders on December 31, 1996. As a result of the
  spin off of Unisource, the Company has accounted for Unisource as a discontinued
  operation.  Continuing  operations of the Company consist of IKON,  which sells,
  rents and leases  photocopiers,  digital  printers  and other  automated  office
  equipment for use in both traditional and integrated office  environments.  IKON
  also provides  outsourcing and imaging services and offers  consulting,  design,
  computer   networking   and  technology   training  for  the  networked   office
  environment.  On January 23, 1997,  shareholders  of the Company voted to change
  the name of the Company from Alco Standard Corporation to IKON Office Solutions,
  Inc.
  
                                Results of Operations
  
           The  discussion  of the results of  operations  reviews the  continuing
  operations of the Company as contained in the Consolidated Statements of Income.
  
                      Three and Nine Months Ended June 30, 1997
             Compared with the Three and Nine Months Ended June 30, 1996
  
           Revenues and income before taxes for the third quarter and year-to-date
  of fiscal 1997  compared to the third  quarter and  year-to-date  of fiscal 1996
  were as follows:
  Three Months Ended                    Nine Months Ended
                                                          June 30         %                    June  30          %
                                                 1997        1996        Change         1997       1996         Change
  (in millions)
  REVENUES                                     $1,316      $1,059        24.3%        $3,735     $2,975       25.5%
                                               ======      ======                     ======     ======
  
  INCOME BEFORE TAXES:
  Operating income, excluding
     transformation costs                       $87.7       $87.8        (0.1%)       $286.3     $238.2       20.2%
  Transformation costs                          (23.0)       (5.6)                     (98.5)     (11.9)
                                                ------       -----                     -----      -----
        Operating income                         64.7        82.2                      187.8      226.3
  Interest expense                              (12.1)       (9.4)                     (31.9)     (26.0)
                                                ------       -----                     -----      -----
                                                $52.6       $72.8       (27.7%)       $155.9     $200.3      (22.2%)
                                                =====       =====                     ======     ======
  THIRD QUARTER:
           The Company's third quarter revenues  increased $257 million,  or 24.3%
  over the third quarter of fiscal 1996, of which $153 million  relates to current
  and prior year acquisitions and $104 million to base companies' internal growth.
  The Company's  worldwide internal revenue growth was 10% in the third quarter of
  fiscal 1997 compared to 12% in the second  quarter of fiscal 1997.  The internal
  revenue  growth rate was lower than  expected as a result of  short-term  issues
  related to the acceleration of the Company's  transformation  initiative and its
  impact on  operations  both in the U.S.  and U.K.  Revenues  from the  Company's
  operations  outside the U.S.  were $169 million for the third  quarter of fiscal
  1997 compared to $135 million for the same period of the prior fiscal year.  The
  Company's European  operations  accounted for $6 million of the increase,  which
  consisted  of  revenue  declines  in the U.K.  of $8  million  offset by revenue
  increases in other European  operations,  while Canadian revenues  increased $24
  million as a result of acquisitions  and internal  growth in base  companies.  A
  fiscal 1996 Mexican acquisition added $4 million of revenue to the third quarter
  of fiscal 1997.
  The Company's  operating  income decreased by $17.5 million compared to
  the prior year's quarter.  However,  excluding  transformation costs,  operating
  income was  essentially  flat at $87.7  million for the third  quarter of fiscal
  1997 compared to $87.8 million in the prior year. Operating income for the third
  quarter was lower than expected due to: 1) lower sales  productivity  in certain
  copier  marketplaces  as a  result  of  the  transformation  initiative,  and 2)
  increased operating expenses resulting from the transformation process.  Finance
  subsidiaries   contributed  18.3%  of  the  Company's  operating  income  before
  transformation  costs in the third  quarter of fiscal 1997  compared to 13.3% in
  the third quarter of fiscal 1996. The Company's  operating  margins were 4.9% in
  the third  quarter of fiscal 1997,  compared to 7.8% in fiscal  1996.  Excluding
  transformation  costs,  the Company's  operating  margins were 6.7% in the third
  quarter of fiscal 1997, compared to 8.3% in the third quarter of fiscal 1996.
  
           Costs associated with the Company's  transformation  program  increased
  $17.3  million in the third quarter of fiscal 1997 compared to the third quarter
  of  fiscal  1996,  primarily  relating  to  employee  severance  agreements  ($5
  million), temporary labor ($2 million) and facility consolidations ($5 million).
  
           Operating  income from  foreign  operations  was $12.8  million for the
  three  months  ended  June 30,  1997,  down $.5  million  from the prior  year's
  quarter.  European  operations posted a $2.0 million decline in operating income
  in the third quarter,  relating primarily to revenue declines in the U.K., while
  Canadian operating income increased $1.4 million and the Mexican operation added
  $.1 million of operating  income in the third quarter of fiscal 1997.  There was
  no material effect of foreign currency exchange rate fluctuations on the results
  of  operations in the third quarter of fiscal 1997 compared to the third quarter
  of fiscal 1996.
  
  NINE MONTHS:
           The Company's nine month revenues increased $760 million, or 25.5% over
  the first nine months of fiscal 1996,  of which $408 million  relates to current
  and prior year acquisitions and $352 million to base companies' internal growth.
  The Company's worldwide internal revenue growth was 12% in the first nine months
  of fiscal 1997.  Revenues  from the Company's  operations  outside the U.S. were
  $483  million for the first nine months of fiscal 1997  compared to $393 million
  for the same period of the prior fiscal year. The Company's European  operations
  accounted for $9 million of the increase, which consisted of revenue declines in
  the  U.K.  of  $36  million  offset  by  revenue  increases  in  other  European
  operations,  while  Canadian  revenues  increased  $71  million  as a result  of
  acquisitions  and internal  growth in base companies and the fiscal 1996 Mexican
  acquisition  added $10  million of  revenue  to the first nine  months of fiscal
  1997.
  
           Transformation  costs increased $86.6 million for the nine months ended
  June 30, 1997 compared to the prior year, and was primarily due to the write-off
  of costs associated with the SAP computer platform that was abandoned during the
  second  quarter ($28  million),  employee  severance  agreements  ($12 million),
  outside  consultants  ($2  million),  temporary  labor  ($8  million),  facility
  consolidations  ($13 million) and costs incurred in connection with the adoption
  of the IKON name worldwide ($10 million).
  
           The Company's  operating  income decreased by $38.5 million compared to
  the prior year's first nine months.  Excluding  transformation costs,  operating
  income increased 20.2% in the first nine months of fiscal 1997 to $286.3 million
  from  $238.2  million  in  the  first  nine  months  of  fiscal  1996.   Finance
  subsidiaries   contributed  15.5%  of  the  Company's  operating  income  before
  transformation  costs in the first nine months of fiscal 1997  compared to 12.2%
  in the first nine months of fiscal 1996.  The Company's  operating  margins were
  5.0% in the first nine months of fiscal  1997,  compared to 7.6% in fiscal 1996.
  Excluding  transformation costs,  operating margins were 7.7% for the first nine
  months of fiscal 1997 compared to 8.0% in the first nine months of fiscal 1996.
  
           Operating income from foreign operations was $34.9 million for the nine
  months ended June 30,  1997,  down $4.3 million from the prior year's first nine
  months. European operations posted a $9.0 million decline in operating income in
  the first nine months of fiscal 1997,  relating primarily to revenue declines in
  the U.K.  Canadian  operating income increased $4.6 million and a fourth quarter
  fiscal 1996 Mexican acquisition added $.1 million of operating income. There was
  no material effect of foreign currency exchange rate fluctuations on the results
  of operations in the first nine months of fiscal 1997 compared to the first nine
  months of fiscal 1996.
  Acquisitions
           In  the  third  quarter  of  fiscal  1997,  the  Company  completed  17
  acquisitions,  bringing  total  year-to-date  acquisitions  to  64.  Of  the  17
  companies  acquired,  seven were  outsourcing and imaging  companies,  four were
  systems  integration  companies and six were traditional copier companies.  This
  year,  as  part  of its  total  solutions  strategy,  IKON  has  emphasized  the
  acquisition  of  systems  integration  and  outsourcing  companies  to build its
  capabilities in these areas.
  
  Other
           Interest expense  increased $2.7 million in the third quarter of fiscal
  1997, and $5.9 million year-to-date. The increased expense is due to higher debt
  levels  in  fiscal  1997  when  adjusted  for the  Unisource  intercompany  debt
  repayment made in December 1996.
  
           Income before taxes decreased by $20.1 million in the third quarter and
  $44.4  million  year-to-date  over the  prior  year,  primarily  reflecting  the
  combined  result of internal  growth from base  companies,  along with  earnings
  contributed by acquisitions, net of increased transformation and interest costs.
  The effective income tax rate  year-to-date is 42.7% compared with 39.6% for the
  comparative period in fiscal 1996.
  
           The Company recorded an extraordinary charge of $12.2 million after tax
  in the first  quarter of fiscal  1997  relating to its early  extinguishment  of
  certain  corporate  debt.  The Company  used the  proceeds of a December 2, 1996
  $553.5 million  intercompany  debt repayment  from its  discontinued  operation,
  Unisource,  to prepay $514 million of corporate debt. The pretax charge of $18.7
  million  is primarily for prepayment  penalties and has a related tax benefit of
  $6.5 million.
  
           Earnings per share from continuing  operations  decreased from $.30 per
  share  for the  third  quarter  of  fiscal  1996 to $.19 per share for the third
  quarter of fiscal 1997. Excluding  transformation costs, earnings per share from
  continuing  operations  decreased 6.3% from $.32 per share for the third quarter
  of fiscal 1996 to $.30 per share in the third quarter of fiscal 1997.  Including
  a loss from discontinued operations, earnings per share of the Company were $.14
  for the third quarter ended June 30, 1996. Year-to-date, earnings per share from
  continuing operations,  excluding the extraordinary charge,  decreased from $.82
  per  share for the first  nine  months of fiscal  1996 to $.56 per share for the
  first nine months of fiscal 1997. Excluding  transformation  costs, earnings per
  share from continuing  operations would have increased 17.0% from $.88 per share
  for the first nine  months of fiscal  1996 to $1.03 per share for the first nine
  months of fiscal 1997. Including the loss per share of $.09 on the extraordinary
  charge and the earnings per share of $.15 on discontinued  operations,  earnings
  per share of the  Company  were $.62 for the nine  months  ended  June 30,  1997
  compared to $1.10 (which includes $.28 for discontinued operations) for the nine
  months ended June 30, 1996.
  
           Weighted average shares of 133.6 million for the quarter ended June 30,
  1997 were 2.6  million  shares  greater  than the 131.0  million for the quarter
  ended June 30, 1996,  primarily the result of stock issued for acquisitions (6.1
  million weighted average shares), net of treasury share repurchases (3.7 million
  weighted shares).
  Financial Condition and Liquidity
  
           Net cash provided by operating activities of continuing  operations for
  the first nine months of fiscal 1997 was $4 million, primarily the result of net
  income from continuing  operations before the  extraordinary  loss, plus noncash
  charges to income,  offset by  increases  in  working  capital.  During the same
  period,  the Company used $876 million in cash for investing  activities,  which
  included finance subsidiary activity of $614 million,  acquisition activity at a
  cash cost of $129 million and capital  expenditures  of $129 million.  Investing
  activities were funded primarily through financing activities.  Cash provided by
  financing  activities  included  $554  million of  intercompany  debt  repaid by
  Unisource  which was used primarily to prepay  corporate debt of the Company and
  $538  million of  additional  net funding for  finance  subsidiaries.  Financing
  activities  also  included $112 million use of cash for the purchase of treasury
  shares. Debt, excluding finance subsidiaries, was $824 million at June 30, 1997,
  a decrease  of $147  million  from the  continuing  operations  debt  balance at
  September 30, 1996 of $971 million.  The debt to capital ratio was 36.4% at June
  30, 1997  compared to 31.4% at  September  30, 1996 and 29.3% at March 31, 1997.
  The  increased  debt to capital ratio at the end of June reflects the effects of
  higher working capital,  which the Company is currently managing to lower levels
  as the transformation proceeds, and the share repurchase program.
  
           On December 16, 1996, the Company entered into a credit  agreement with
  several banks under which it may borrow up to $400 million. This credit facility
  replaces a $500 million credit  facility  which was due to expire  December 1999
  and a $100 million  credit  facility which was canceled on December 2, 1996. The
  reduced credit commitment  reflects the spin-off of the Unisource business which
  was  effective  December 31, 1996.  As of June 30, 1997,  short-term  borrowings
  totaled $256  million,  leaving $144  million  available  under the $400 million
  credit facility. The Company also has $450 million available for either stock or
  debt offerings under its shelf registration statement filed November 1995.
  
           Finance subsidiaries debt grew by $538 million from September 30, 1996,
  a result of increased  leasing  activity.  During the nine months ended June 30,
  1997,  IKON Capital  issued an  additional  $632 million  under its $3.5 billion
  medium  term notes  program  which began in July 1994  (including  the new shelf
  registration filed in May 1997 for $2 billion of medium term notes). At June 30,
  1997,  $1.5  billion  of medium  term  notes  were  outstanding  with a weighted
  interest rate of 6.7%,  leaving $1.9 billion  available under this program.  The
  new  registration  statement has essentially the same provisions as the existing
  program. Under its $275 million asset securitization programs, IKON Capital sold
  $77.3 million in direct  financing leases during the first nine months of fiscal
  1997, replacing those leases liquidated and leaving the amount of contracts sold
  unchanged.
  
           The Company filed shelf  registrations  for 10 million shares of common
  stock in January 1996 and 5 million  shares of common stock in March 1996. A new
  shelf  registration  was filed on April 10,  1997 for an  additional  10 million
  shares.  Shares issued under these  registration  statements  are being used for
  acquisitions.  Approximately  13.3  million  shares have been issued under these
  shelf registrations through June 30, 1997, leaving 11.7 million shares available
  for issuance.
  
           On April 17, 1997, the Company  announced  that it may repurchase  from
  time to time as much as five  percent of the  outstanding  IKON common  stock in
  open market  transactions.  Through June 30, 1997, the Company  repurchased  4.4
  million common shares for $109.7 million.  Approximately  2.3 million shares may
  still be acquired by the Company in open market transactions under this program.
  
           The Company  believes that its operating cash flow together with unused
  bank credit  facilities and other financing  arrangements  will be sufficient to
  finance  current  operating   requirements   including   capital   expenditures,
  acquisitions,  dividends,  stock  repurchases  and  costs  associated  with  the
  Company's  transformation  program.  The Company  estimates the total  remaining
  costs of its  transformation  program to be from $70  million  to $100  million,
  excluding capital costs of $90 million to $100 million. Quarterly transformation
  costs are  expected to be in the range of $5 million to $30 million for the next
  five quarters.
  Forward-looking Information
  
           This document contains, and other materials filed or to be filed by the
  Company with the Commission which are incorporated by reference  herein, as well
  as information  included in oral statements or other written  statements made or
  to be made by the Company, contain or will contain or include, disclosures which
  are  forward-looking  statements  within  the  meaning  of  Section  27A  of the
  Securities  Act of 1933,  as amended,  and Section 21E of the 1934 Exchange Act.
  Such  forward-looking   statements  address,   among  other  things,   strategic
  initiatives  (including  plans for enhancing the Company's  business through new
  acquisitions,  information technology systems,  sales strategies,  market growth
  plans,  margin  enhancement  initiatives,  capital  expenditures  and  financing
  sources).  Such  forward-looking  information is based upon management's current
  plans or expectations and is subject to a number of uncertainties and risks that
  could significantly affect current plans,  anticipated actions and the Company's
  future financial  condition and results.  These uncertainties and risks include,
  but are not limited to, those  relating to  successfully  managing an aggressive
  program to  acquire  and  integrate  new  companies,  including  companies  with
  technical services and products that are relatively new to the Company, and also
  including companies outside the U.S., which present additional risks relating to
  international  operations;   risks  and  uncertainties  relating  to  conducting
  operations in a competitive  environment;  delays,  difficulties,  technological
  changes,   management  transitions  and  employment  issues  associated  with  a
  large-scale   transformation   project;  debt  service  requirements  (including
  sensitivity to fluctuations in interest rates); and general economic conditions.
  As a  consequence,  current  plans,  anticipated  actions  and future  financial
  condition  and results may differ from those  expressed  in any  forward-looking
  statements made by or on behalf of the Company.
  PART II. OTHER INFORMATION
  
  Item 6.  Exhibits and Reports on Form 8-K
  
           (a)   The following Exhibits are furnished pursuant to Item 601 of
                 Regulation S-K:
  
                 Exhibit No. (11) Computations of Earnings per Share
  
                 Exhibit No. (27) Financial Data Schedule
  
           (b)   Reports on Form 8-K
  
                 On April 18, 1997, the registrant  filed a Current Report on Form
                 8-K to file,  under  Item 5 of the  form,  the  earnings  for the
                 fiscal quarter ended March 31, 1997, the  announcement of certain
                 management  changes,  and the announcement that it may repurchase
                 from time to time as much as 5 percent of its outstanding  shares
                 in open market transactions.
  
                 On April 24, 1997, the registrant  filed a Current Report on Form
                 8-K to file,  under Item 5 of the form, a Press  Release  stating
                 that it was unaware of any reason its stock,  which  recently had
                 traded down sharply,  should be under pressure. The Press Release
                 also stated  that IKON's  business is strong and that the Company
                 knows of no  material  developments  concerning  its  business or
                 financial statements which have not been publicly disclosed.
  
                 On June 19, 1997, the  registrant  filed a Current Report on Form
                 8-K to file,  under Item 5 of the form, a summary  description of
                 its  amended  Rights  Agreement  which was adopted as of June 18,
                 1997, and which amends the previous  agreement that was scheduled
                 to  expire  on  February  10,  1998.  A copy of the  amended  and
                 restated Rights Agreement dated as of June 18, 1997, was filed as
                 Exhibit 4.1 on Item 7(c) of the form.
  
                 On June 25, 1997, the  registrant  filed a Current Report on Form
                 8-K to file, under Item 5 of the form, a Press Release announcing
                 that earnings for the third quarter ending June 30, 1997 would be
                 lower than  expected,  due to  short-term  issues  related to the
                 acceleration of its business transformation process.
  
                 On July 17, 1997, the  registrant  filed a Current Report on Form
                 8-K to file,  under  Item 5 of the  form,  the  earnings  for the
                 fiscal quarter ended June 30, 1997.
  SIGNATURES
  
  Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
  Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
  undersigned,  thereunto duly authorized. This report has also been signed by the
  undersigned in his capacity as the chief accounting officer of the Registrant.
  
                                           IKON OFFICE SOLUTIONS, INC.
  
  Date  August 12, 1997                    /s/ Michael J. Dillon
                                           Michael J. Dillon
                                           Vice President and Controller
                                           (Chief Accounting Officer)
  INDEX TO EXHIBITS
  
  Exhibit Number
  
           (11)       Computations of Earnings per Share
  
           (27)       Financial Data Schedule