content: UNITED STATES
                         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, 1999 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, 1999.
  
  Common Stock, no par value                                  149,124,413 shares
  
  <PAGE>
  
                                        INDEX
  
                             IKON OFFICE SOLUTIONS, INC.
  
  
  PART I.  FINANCIAL INFORMATION
  
  
       Item 1.             Financial Statements (Unaudited)
  
                           Consolidated Balance Sheets--June 30, 1999
                           and September 30, 1998
  
                           Consolidated Statements of Operations--Three and Nine
                           Months ended June 30, 1999 and June 30, 1998
  
                           Consolidated Statements of Cash Flows--Nine Months
                           ended June 30, 1999 and June 30, 1998
  
                           Notes to Consolidated Financial Statements--
                           June 30, 1999
  
  
       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                                                                1999             1998
  <S>                                                              <C>              <C>
  Current Assets
      Cash and cash equivalents                                    $   118,641      $       963
      Restricted cash                                                   33,433
      Accounts receivable, net                                         752,495          793,934
      Finance receivables, net                                         876,132          827,363
      Inventories                                                      381,976          431,837
      Prepaid expenses and other current assets                        110,113           97,534
      Deferred taxes                                                   111,986          112,609
                                                                   -----------      -----------
      Total current assets                                           2,384,776        2,264,240
                                                                   -----------      -----------
  
  Investments and Long-Term Receivables                                 21,502           25,109
  
  Long-Term Finance Receivables, net                                 1,661,711        1,565,674
  
  Equipment on Operating Rental, net                                    95,741          110,891
  
  Property and Equipment, at cost                                      521,430          499,546
      Less accumulated depreciation                                    266,874          239,440
                                                                   -----------      -----------
                                                                       254,556          260,106
                                                                   -----------      -----------
  
  Goodwill                                                           1,391,156        1,387,390
  
  Miscellaneous                                                        136,968          149,400
                                                                   -----------      -----------
  
                                                                   $ 5,946,410      $ 5,762,810
                                                                   ===========      ===========
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  
  Current Liabilities
      Current portion of long-term debt                            $    87,388      $    56,358
      Current portion of long-term debt,
        finance subsidiaries                                           994,786          726,159
      Notes payable                                                     10,066           87,180
      Trade accounts payable                                           185,837          245,520
      Accrued salaries, wages and commissions                          115,496          115,101
      Deferred revenues                                                197,358          211,824
      Other accrued expenses                                           321,415          326,725
                                                                   -----------      -----------
      Total current liabilities                                      1,912,346        1,768,867
                                                                   -----------      -----------
  
  Long-Term Debt                                                       717,122          712,384
  
  Long-Term Debt, Finance Subsidiaries                               1,299,112        1,374,478
  
  Deferred Taxes                                                       351,563          325,488
  
  Other Long-Term Liabilities                                          156,966          154,305
  
  Shareholders' Equity
      Series BB conversion preferred stock, no par value,
         9/98 - 3,877 depositary shares issued and outstanding                          290,170
      Common stock, no par value:
         Authorized - 300,000 shares
         Issued 6/99 - 149,193 shares;
            9/98 - 137,139 shares                                    1,007,547          689,195
      Unearned compensation                                             (6,610)
      Retained earnings                                                512,583          452,051
      Accumulated other comprehensive income                            (1,800)            (473)
      Cost of common shares in treasury: 6/99 - 79 shares;
         9/98 - 124 shares                                              (2,419)          (3,655)
                                                                   -----------      -----------
                                                                     1,509,301        1,427,288
                                                                   -----------      -----------
  
                                                                   $ 5,946,410      $ 5,762,810
                                                                   ===========      ===========
  </TABLE>
  
  See notes to consolidated financial statements.
  
  <PAGE>
  
                             IKON OFFICE SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share amounts)
  
  <TABLE>
  <CAPTION>
                                                             Three Months Ended                    Nine Months Ended
                                                                   June 30                              June 30
                                                        ------------------------------       ------------------------------
                                                            1999             1998                1999             1998
                                                        --------------   -------------       --------------   -------------
  Revenues
  <S>                                                 <C>              <C>                 <C>              <C>
  Net sales                                           $       719,047  $      721,044      $     2,146,828  $    2,236,092
  Service and rentals                                         586,850         594,806            1,754,734       1,740,694
  Finance income                                               79,570          78,878              252,972         223,788
                                                        --------------   -------------       --------------   -------------
                                                            1,385,467       1,394,728            4,154,534       4,200,574
                                                        --------------   -------------       --------------   -------------
  
  Costs and Expenses
  Cost of goods sold                                          500,614         520,442            1,464,723       1,490,189
  Service and rental costs                                    331,240         351,701            1,007,930       1,028,514
  Finance interest expense                                     30,553          33,171               92,539          96,876
  Selling and administrative                                  455,043         543,703            1,393,917       1,450,307
  Loss from asset impairment                                                   20,000                               20,000
  Transformation costs                                                         16,539                               54,250
                                                        --------------   -------------       --------------   -------------
                                                            1,317,450       1,485,556            3,959,109       4,140,136
                                                        --------------   -------------       --------------   -------------
  
  Operating income (loss)                                      68,017         (90,828)             195,425          60,438
  Interest expense                                             17,031          17,684               55,573          50,956
                                                        --------------   -------------       --------------   -------------
  Income (loss) before taxes                                   50,986        (108,512)             139,852           9,482
  Income taxes (benefit)                                       23,708         (19,867)              61,031          30,852
                                                        --------------   -------------       --------------   -------------
  Net Income (loss)                                            27,278         (88,645)              78,821         (21,370)
  Less:  Preferred Dividends                                                    4,885                               14,655
                                                        --------------   -------------       --------------   -------------
  Available to Common Shareholders                    $        27,278  $      (93,530)     $        78,821  $      (36,025)
                                                        ==============   =============       ==============   =============
  
  Basic and Diluted Earnings (Loss) Per Share                  $ 0.18         $ (0.69)              $ 0.53         $ (0.27)
                                                        ==============   =============       ==============   =============
  
  Cash Dividends Per Share of Common Stock                     $ 0.04          $ 0.04               $ 0.12          $ 0.12
                                                        ==============   =============       ==============   =============
  </TABLE>
  
  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
                                                                                    -------------------------------------
                                                                                             1999              1998
                                                                                    -------------------------------------
  Operating Activities
  <S>                                                                                  <C>               <C>
       Net income                                                                      $       78,821    $       (21,370)
       Additions (deductions) to reconcile net income to net cash
           provided by operating activities
              Depreciation                                                                    103,040            101,219
              Amortization                                                                     45,543             50,152
              Provisions for losses on accounts receivable                                     25,743             46,421
              Provision for deferred taxes                                                     32,000             14,000
              Gain on asset securitizations                                                   (25,360)            (3,145)
              Loss from asset impairment                                                                          20,000
              Changes in operating assets and liabilities, net of effects from
                  acquisitions:
                     Decrease (increase) in accounts receivable                                21,904            (27,364)
                     Decrease (increase) in inventories                                        51,332            (26,802)
                     Decrease (increase) in prepaid expenses and other current assets           8,909            (10,445)
                     (Decrease) increase in accounts payable, deferred
                         revenues and accrued expenses                                        (85,625)            19,473
              Miscellaneous                                                                     9,779            (10,013)
                                                                                         -------------     --------------
  Net cash provided by operating activities                                                   266,086            152,126
  
  Investing activities
       Proceeds from the sale of property and equipment                                        14,644             11,658
       Cost of companies acquired, net of cash acquired                                       (24,419)           (41,186)
       Expenditures for property and equipment                                                (72,617)           (91,228)
       Expenditures for equipment on operating rental, net                                    (28,270)           (56,540)
       Purchase of miscellaneous assets                                                        (2,934)            (9,042)
       Finance receivables - additions                                                       (953,475)        (1,156,662)
       Finance receivables - collections                                                      668,678            626,042
       Proceeds from sale of finance subsidiaries' lease receivables                          399,446            162,095
       Repurchase of finance subsidiary's lease receivables                                  (250,000)
                                                                                         -------------     --------------
  Net cash used in investing activities                                                      (248,947)          (554,863)
  
  Financing activities
       Short-term borrowing repayments, net                                                   (77,114)          (172,398)
       Proceeds from issuance of long-term debt                                                56,387            259,356
       Proceeds from option exercises and sale of treasury shares                               4,803             17,566
       Long-term debt repayments                                                              (23,143)           (17,704)
       Finance subsidiaries' debt - issuance                                                  750,941            601,892
       Finance subsidiaries' debt - repayments                                               (559,991)          (267,890)
       Dividends paid                                                                         (17,743)           (30,830)
       Deposit to restricted cash                                                             (33,433)
       Purchase of treasury shares                                                               (168)            (3,963)
                                                                                         -------------     --------------
  Net cash provided by financing activities                                                   100,539            386,029
  
  Net increase (decrease) in cash and cash equivalents                                        117,678            (16,708)
  Cash at beginning of year                                                                       963             21,341
                                                                                         -------------     --------------
  Cash and cash equivalents at end of period                                           $      118,641    $         4,633
                                                                                         =============     ==============
  </TABLE>
  
  
  See notes to consolidated financial statements.
  
  <PAGE>
  
                             IKON OFFICE SOLUTIONS, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    JUNE 30, 1999
  
  
  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/A for the year ended September 30, 1998.
  Certain prior year amounts have been reclassified to conform to the current year
  presentation.
  
  Note 2:  Asset Securitization
  
           In addition to the $410 million of asset securitizations in place at
  the end of fiscal 1998 in the U.S. and Canada, in December 1998, the Company's
  U.S. finance subsidiary entered into an asset securitization transaction whereby
  it sold $366.6 million in direct financing lease receivables for $250 million in
  cash and a retained interest in the remainder. The agreement is for an initial
  three-year term with certain renewal provisions and was structured as a
  revolving asset securitization so that as collections reduce previously sold
  interests in the pool of leases, additional leases can be sold up to $250
  million. The terms of the agreement provide that the Company will continue to
  service the lease portfolio for the securitization provider. The Company
  recognized a pretax gain of $14.3 million during the first quarter of fiscal
  1999 on this agreement and additional gains on the revolving portion of all
  agreements of $11.1 million, for total a total gain of $25.4 million for the
  nine months ended June 30, 1999. On May 25, 1999, the Company's U.S. finance
  subsidiary repurchased the leases sold in this transaction with the proceeds
  from the lease-backed notes described below.
  
  
  Note 3:  Leased-backed Notes
  
           On May 19, 1999, IKON Receivables, LLC (an affiliate of the U.S.
  finance subsidiary) publicly issued approximately $752 million of lease-backed
  notes (the "Notes") under a $1.825 billion shelf registration statement. Class
  A-1 Notes totaling $304,474,000 have a stated interest rate of 5.11%, Class A-2
  Notes totaling $61,579,000 have a stated interest rate of 5.60%, Class A-3 Notes
  totaling $304,127,000 have a stated interest rate of 5.99% and Class A-4 Notes
  totaling $81,462,000 have a stated interest rate of 6.23%. The transaction was
  structured using two special purpose limited liability companies: IKON
  Receivables-1, LLC, of which the Company's U.S. finance subsidiary is the sole
  member, and IKON Receivables, LLC, of which IKON Receivables-1, LLC is the sole
  member. The Company's U.S. finance subsidiary contributed to IKON Receivables-1,
  LLC a pool of office equipment leases or contracts and related assets (the
  "Asset Pool"), and IKON Receivables-1, LLC transferred them to IKON Receivables,
  LLC, which is the issuer of the Notes. The Notes are secured by the Asset Pool
  and the payments on the Notes are made from payments on the leases. The
  Company's U.S. finance subsidiary received approximately $749 million in net
  proceeds from the sale of the Notes and used $250 million of that amount to
  repurchase previously sold leases. The repurchased leases were contributed as
  part of the Asset Pool. Restricted cash on the balance sheet represents cash
  that has been collected on the lease receivables in the Asset Pool, which must
  be used to repay the Notes.
  
  Note 4:  Conversion of Series BB Preferred Stock
  
           On October 1, 1998, each of the outstanding depositary shares of the
  Series BB Preferred Stock automatically converted to 2.4972 shares of common
  stock per depositary share, resulting in the issuance of 9,682,143 common
  shares. The common stock account increased by $290.2 million to reflect the
  conversion. There was no change to total shareholders' equity.
  
  <PAGE>
                             IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1999
  
  Note 5:  Transformation Costs
  
           In September 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. The
  Company substantially completed the transformation program as of September 30,
  1998. The transformation involved a variety of activities, including
  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 common benefit programs. Transformation costs in the first nine
  months of fiscal 1998 of $54.3 million relate principally to severance and other
  employee-related costs, including temporary labor ($36.7 million), facility
  consolidation costs, including lease buyouts and write-offs of leasehold
  improvements ($12.2 million), and technology conversion costs ($5.4 million).
  Cash of $9.9 million was expended during the first nine months of fiscal 1999,
  reducing the September 30, 1998 severance and lease buyout accruals to $4.0
  million and $6.2 million, respectively, at June 30, 1999.
  
  
  Note 6:  Comprehensive Income
  
           As of October 1, 1998, the Company adopted Statement of Financial
  Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS
  130 establishes rules for the reporting and presentation of comprehensive income
  and its components. SFAS 130 requires foreign currency translation adjustments,
  equity adjustments related to pension liabilities and mark to market adjustments
  on retained interests in lease receivables to be included in other comprehensive
  income. Equity accounts as of September 30, 1998 have been reclassified to
  conform to the requirements of SFAS 130. The adoption of SFAS 130 did not impact
  the Company's net income or total shareholders' equity.
  
           Total comprehensive income is as follows (in thousands):
  <TABLE>
  <CAPTION>
                                                     Three Months Ended            Nine Months Ended
                                                           June  30                     June 30
                                                       1999         1998           1999          1998
                                                    --------      --------      --------      --------
  <S>                                               <C>           <C>           <C>           <C>
       Net income                                   $ 27,278      ($88,645)     $ 78,821      ($21,370)
       Foreign currency translation adjustments       (1,562)         (191)       (1,327)         (470)
       Mark to market adjustment, net of tax          (1,128)                          0
                                                    --------      --------      --------      --------
       Total comprehensive income                   $ 24,588      ($88,836)     $ 77,494      ($21,840)
                                                    ========      ========      ========      ========
  </TABLE>
  
  Note 7:   Income Tax Benefit
  
           During the second quarter of fiscal 1999, the Company recorded a
  one-time tax benefit of $4.0 million related to restructuring the European
  leasing operations. Excluding the one-time benefit, diluted earnings per share
  for the nine months ended June 30, 1999 would have been $.50.
  
  <PAGE>
                             IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1999
  
  Note 8:  Earnings Per Share
  
           The following table sets forth the computation of basic and diluted
  earnings per share (in thousands):
  <TABLE>
  <CAPTION>
  <S>                                                         <C>           <C>
       For the fiscal quarter ended                             6/30/99      6/30/98
       ------------------------------------------------------------------------------
       Numerator:
            Net income                                        $  27,278     $ (88,645)
            Preferred stock dividends                                           4,885
                                                              ---------     ---------
            Numerator for basic and diluted earnings
               per share - income available to
               common shareholders                            $  27,278     $ (93,530)
                                                              =========     =========
  
       Denominator:
            Weighted average shares                             148,422       135,465
            Contingently issuable shares                            365           116
                                                              ---------     ---------
            Denominator for basic earnings per
               share - weighted average shares                  148,787       135,581
  
            Effect of dilutive securities:
               Additional contingently issuable shares              157
               Employee stock options                               171
                                                              ---------
            Dilutive potential common shares                        328
            Denominator for diluted earnings per
                   share - adjusted weighted average
                   shares and assumed conversions               149,115       135,581
                                                              =========     =========
  
       Basic earnings (loss) per share                        $    0.18     ($   0.69)
                                                              =========     =========
  
       Diluted earnings (loss) per share                      $    0.18     ($   0.69)
                                                              =========     =========
  
  
       For the nine months ended                                6/30/99       6/30/98
       ------------------------------------------------------------------------------
       Numerator:
            Net income                                        $  78,821     $ (21,370)
            Preferred stock dividends                                          14,655
                                                              ---------     ---------
            Numerator for basic and diluted earnings
               per share - income available to
               common shareholders                            $  78,821     $ (36,025)
                                                              =========     =========
  
       Denominator:
            Weighted average shares                             147,748       134,681
            Contingently issuable shares                            828           118
                                                              ---------     ---------
            Denominator for basic earnings per
               share - weighted average shares                  148,576       134,799
  
  
       <PAGE>
                             IKON OFFICE SOLUTIONS, INC
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1999
  
       Note 8:  Earnings Per Share (continued)
  
       Effect of dilutive securities:
               Additional contingently issuable shares              253
               Employee stock options                               132
                                                              ---------
       Dilutive potential common shares                             385
            Denominator for diluted earnings per
                   share - adjusted weighted average
                   shares and assumed conversions               148,961       134,799
                                                              =========     =========
  
       Basic earnings (loss) per share                        $    0.53     ($   0.27)
                                                              =========     =========
  
       Diluted earnings (loss) per share                      $    0.53     ($   0.27)
                                                              =========     =========
  </TABLE>
  
           Options to purchase 6,319,528 shares of common stock at $14.00 per
  share to $56.42 per share were outstanding during the third quarter of fiscal
  1999 and options to purchase 3,496,536 shares of common stock at $26.53 per
  share to $62.93 per share were outstanding during the third quarter of fiscal
  1998 but were not included in the computation of diluted earnings per share
  because the options' exercise prices were greater than the average market price
  of the common shares and, therefore, the effect would be antidilutive.
  
           The Company's Series BB conversion preferred stock is excluded from the
  diluted calculation for the quarter and nine months ended June 30, 1998 because
  the effect of adding 9,682,143 shares and deleting the preferred dividends to
  reflect assumed conversion would be antidilutive.
  
  
  Note 9:  Shareholder Lawsuit
  
           The Company and certain current and former principal officers and
  employee directors were named as defendants in a series of purported class
  action complaints which were purportedly filed on behalf of purchasers of the
  Company's common stock. The complaints were filed in the United States District
  Court for the Eastern District of Pennsylvania following the issuance of the
  Company's August 14, 1998 earnings release. By court order dated November 30,
  1998 the Court appointed co-lead counsel. By court order dated December 3, 1998,
  all the complaints were consolidated. The consolidated complaint was filed on
  December 18, 1998 and alleges that the defendants publicly disseminated a series
  of false and misleading statements, including filings with the Securities and
  Exchange Commission, concerning the Company's revenue, profitability and
  financial condition, in violation of the federal securities law. The plaintiffs
  seek to represent a class of persons who purchased or acquired the Company's
  equity securities between January 24, 1996 and August 13, 1998. In an amended
  consolidated complaint filed on June 28, 1999, Ernst & Young LLP (the Company's
  independent auditors) was added as a defendant. The complaint seeks unspecified
  compensatory and punitive damages, prejudgment interest, attorneys' fees and
  costs. The Company has responded to the complaint and believes that the
  allegations contained therein are without merit and that the outcome of the
  proceedings will not have a material adverse effect on the financial position or
  overall trends in the results of operations of the Company. However, due to the
  inherent uncertainties of litigation, the Company cannot predict the ultimate
  outcome of these proceedings or the probability of any liability or losses
  relating thereto, and, accordingly, no provision has been made for any liability
  or loss that may result from the adjudication or settlement of these proceedings
  in the financial statements for the first nine months of fiscal 1999. An
  unfavorable outcome of these proceedings could have a material adverse impact on
  the Company's financial condition and results of operations.
  
  
  <PAGE>
  Item 2:  Management's Discussion and Analysis of Results of Operations and
  Financial Condition and Liquidity
  
           The Company sells, rents and leases photocopiers, digital printers and
  other automated office equipment for use in both traditional and integrated
  office environments. The Company also provides outsourcing and imaging services
  and offers consulting, design, computer networking and technology training for
  the networked office environment.
  
                                Results of Operations
  
           The discussion of the results of operations reviews the operations of
  the Company as reported in the Consolidated Statements of Operations.
  
                      Three and Nine Months Ended June 30, 1999
             Compared with the Three and Nine Months Ended June 30, 1998
  
           Results of operations for the third quarter and year-to-date of fiscal
  1999 compared to the third quarter and year-to-date of fiscal 1998 were as
  follows:
  <TABLE>
  <CAPTION>
                                                     Three Months Ended                      Nine Months Ended
                                                      June 30             %                June 30            %
                                                 1999        1998       Change         1999       1998      Change
  (in millions)
  <S>                                          <C>         <C>           <C>          <C>        <C>          <C>
  REVENUES                                     $1,385      $1,395        (0.7)%       $4,155     $4,201       (1.1)%
                                               ======     =======                     ======     ======
  
  INCOME BEFORE TAXES:
  Operating income, excluding
     transformation costs                       $68.0      $(74.3)                    $195.4     $114.7       70.4%
  Transformation costs                                      (16.5)                                (54.3)
                                               ------     --------                    ------     ------
        Operating income                         68.0       (90.8)                     195.4       60.4      223.5%
  Interest expense                              (17.0)      (17.7)                     (55.5)     (50.9)
                                               ------     -------                     ------     ------
                                                $51.0     $(108.5)                    $139.9       $9.5    1,372.6%
                                               ======     ========                    ======     ======
  </TABLE>
  
  
  THIRD QUARTER:
           The Company's third quarter revenues decreased by $10 million or .7%
  from the third quarter of fiscal 1998. Revenues increased from the second
  quarter of fiscal 1999, but were down compared to the same period in the prior
  fiscal year due primarily to reductions in and realignment of the sales force,
  as well as the closure or consolidation of 22 document services branches and two
  technology services branches during fiscal 1999. These actions were taken to
  strengthen productivity, tighten marketing disciplines and build a solid
  cost-competitive infrastructure. Net sales, which includes equipment revenue,
  decreased by $2 million or .3% in the third quarter of fiscal 1999, compared to
  the third quarter of fiscal 1998. Net sales were down slightly ($1 million) from
  the second quarter of fiscal 1999. Service and rental revenue decreased by $8
  million or 1.3% compared to the third quarter fiscal 1998, but increased by $10
  million from the second quarter of fiscal 1999. Finance income increased by $.7
  million or .9% compared to the third quarter of fiscal 1998, due to the growth
  in the lease portfolio.
  
           Revenues from the Company's operations outside the U.S. were $198
  million for the third quarter of fiscal 1999 compared to $181 million for the
  same period of the prior fiscal year. European operations increased by $28
  million, due primarily to acquisitions, while Canadian revenues decreased by $10
  million and other foreign operations revenue decreased by $1 million in the
  third quarter of fiscal 1999 compared to the third quarter of fiscal 1998. There
  were no acquisitions in the third quarter of fiscal 1999.
  
  <PAGE>
  
           The Company's operating income increased by $158.8 million compared to
  the prior year's quarter. Excluding transformation costs in fiscal 1998,
  operating income increased by $142.3 million to $68.0 million for the third
  quarter of fiscal 1999 compared to a loss of $74.3 million in the third quarter
  of fiscal 1998. During August 1998, the Company completed an in-depth review of
  its operations and recorded charges against earnings totaling $94 million
  related to the third quarter of fiscal 1998 and $16 million related to the
  second quarter of fiscal 1998. Excluding the third quarter charges,
  pre-transformation operating income would have been $19.8 million in the third
  quarter of fiscal 1998, compared to $68.0 million in the third quarter of fiscal
  1999, an increase of $48.2 million. Gross margins in the third quarter of fiscal
  1999 were 37.8%, compared to 35.1% in the same period of the prior fiscal year
  (37.2% excluding the third quarter charges) and 37.6% in the second quarter of
  fiscal 1999. This increase is primarily the result of increased service margins.
  The increase in service margins reflects the growing discipline and productivity
  from the national sales model, which includes a focus on protecting and growing
  aftermarket. Improved service margins are partially offset by a decline in
  equipment margins due to continued price pressure in analog sales and to the
  closing of a portion of the Company's remanufacturing operations in June 1999.
  Selling and administrative expense as a percent of revenue was 32.9% in the
  third quarter of fiscal 1999 compared to 39.0% in the third quarter of fiscal
  1998 (35.9% excluding the third quarter charges). Selling and administrative
  expense as a percent of revenue decreased in the third quarter of fiscal 1999
  from the 33.6% in the second quarter of fiscal 1999 as a result of the ongoing
  expense reduction programs launched in the second half of fiscal 1998.
  
           Costs associated with the Company's transformation program were $16.5
  million in the third quarter of fiscal 1998. Severance and other employee costs
  were $10.0 million, facility consolidation costs were $5.4 million and
  technology conversion costs were $1.1 million. The transformation is essentially
  complete, and there are no significant transformation expenses in fiscal 1999.
  
           Operating income from foreign operations was $5.4 million for the third
  quarter of fiscal 1999, down $2.5 million from $7.9 million (excluding
  transformation costs) for the third quarter of fiscal 1998 and down slightly
  ($.3 million) from the second quarter of fiscal 1999. Canadian operating income
  increased by $.4 million compared to the third quarter of fiscal 1998, while
  European operating income decreased by $1.8 million and other foreign operations
  decreased by $1.1 million. Europe has been experiencing price discounting of
  both analog and digital products as a result of direct competition from the
  manufacturers. There was no material effect of foreign currency exchange rate
  fluctuations on the results of operations in the third quarter of fiscal 1999
  compared to the third quarter of fiscal 1998.
  
  NINE MONTHS:
           The Company's revenues for the first nine months of fiscal 1999
  decreased by $46 million or 1.1% compared to the first nine months of fiscal
  1998. The first quarter of fiscal 1999 included a $14.3 million gain from an
  asset securitization. Excluding the securitization gain, overall revenue
  decreased by $60 million compared to the first nine months of fiscal 1998. Net
  sales, which includes equipment revenue, decreased by $89 million or 4.0%
  compared to the first nine months of fiscal 1998. Service and rental revenue
  increased by $14 million or .8%. Finance income increased $15 million, or 6.6%,
  excluding the gain, due to the growth in the lease portfolio.
  
           Revenues from the Company's operations outside the U.S. were $605
  million for the first nine months of fiscal 1999 compared to $548 million for
  the same period of the prior fiscal year. European operations increased by $90
  million, due primarily to acquisitions, while Canadian revenues decreased by $31
  million and other foreign operations revenue decreased by $2 million in the
  first nine months of fiscal 1999 compared to the first nine months of fiscal
  1998. In the first quarter of fiscal 1999, the Company completed five
  acquisitions, all in Europe.
  
           The Company's operating income increased by $135.0 million in the first
  nine months of fiscal 1999 compared to the first nine months of fiscal 1998.
  Excluding transformation costs in fiscal 1998 and the gain from the asset
  securitization in fiscal 1999, operating income increased by $66.4 million to
  $181.1 million for the first nine months of fiscal 1999 compared to $114.7
  million for the first nine months of the prior fiscal year. Year to date
  operating income for fiscal 1998 was impacted by the $110 million of charges
  noted above.
  
  <PAGE>
  
           Costs associated with the Company's transformation program were $54.3
  million in the first nine months of fiscal 1998. Severance and other employee
  costs were $36.7 million, facility consolidation costs were $12.2 million and
  technology conversion costs were $5.4 million. The transformation is essentially
  complete and there are no significant transformation expenses in fiscal 1999.
  
           Operating income from foreign operations was $14.6 million for the
  first nine months of fiscal 1999, down $16.7 million from $31.3 million
  (excluding transformation costs) for the first nine months of fiscal 1998.
  European operations decreased by $6.6 million compared to the same period in the
  prior fiscal year, while Canadian operating income decreased by $8.0 million and
  other foreign operations decreased by $2.1 million. There was no material effect
  of foreign currency exchange rate fluctuations on the results of operations in
  the first nine months of fiscal 1999 compared to the first nine months of fiscal
  1998.
  
  Other
           Interest expense decreased by $.7 million in the third quarter of
  fiscal 1999 compared to the third quarter of fiscal 1998 but increased by $4.6
  million in the first nine months of fiscal 1999 compared to the first nine
  months of fiscal 1998. The increased expense year-to-date is due primarily to
  higher debt levels in the first half of fiscal 1999.
  
           Income before taxes increased by $159.5 million in the third quarter of
  fiscal 1999 and $130.4 million in the first nine months of fiscal 1999 compared
  to the comparable periods in the prior fiscal year, primarily as a result of the
  $110 million of charges in fiscal 1998 and the transformation costs in fiscal
  1998. The effective income tax rate for the first nine months of fiscal 1999 is
  43.6% compared to 325.3% for the same period in fiscal 1998. Income tax expense
  in fiscal 1999 includes a one-time tax benefit related to restructuring the
  European leasing operations in the second quarter. Excluding this one-time
  benefit, the year-to-date effective tax rate would have been 46.5%. The unusual
  effective tax rate of 325.3% in the first nine months of fiscal 1998 is the
  result of the impact of non-tax deductible items (primarily goodwill
  amortization and loss from asset impairment) in relation to lower income before
  taxes.
  
           Diluted earnings per common share increased from $(.69) per share for
  the third quarter of fiscal 1998 to $.18 per share for the third quarter of
  fiscal 1999. Excluding transformation costs and special charges, diluted
  earnings per common share were $(.11) per share in the third quarter of fiscal
  1998. Diluted earnings per common share increased from $(.27) per share for the
  first nine months of fiscal 1998 to $.53 per share for the first nine months of
  fiscal 1999. Excluding the after-tax gain on the asset securitization that was
  completed in December 1998, diluted earnings per common share were $.47 in the
  first nine months of fiscal 1999. Diluted weighted average shares increased by
  14.2 million for the nine months ended June 30, 1999 primarily as a result of
  the conversion of the Series BB preferred stock on October 1, 1998 (9.7 million
  weighted shares) and the full period impact of 1998 common share issuances
  related to acquisitions (3.7 million weighted shares).
  
  Impact of Year 2000
  
           State of Readiness. The Year 2000 issue arises from computer programs
  being written using two digits rather than four to define the applicable year.
  Any of the Company's computer programs or hardware that have date-sensitive
  software or embedded technology (non-IT systems) may recognize a date using "00"
  as the year 1900 rather than the year 2000. This could result in a system
  failure or miscalculations causing disruptions of operations, including, among
  other things, a temporary inability to process transactions, send invoices, or
  engage in similar normal business activities. The potential for a problem exists
  with all computer hardware and software, as well as in products with embedded
  technology: copiers and fax machines; security and HVAC systems; voice/telephony
  systems; elevators, etc.
  
  <PAGE>
  
           The Company has appointed a Year 2000 Corporate Compliance Team, which
  has prepared an international compliance program for the Company and is
  responsible for coordinating and inspecting compliance activities in all
  business units. The compliance program requires all business units and locations
  in every country to inventory potentially affected systems and products, assess
  risk, take any required corrective actions, test and certify compliance. The
  Company's Year 2000 Testing and Certification Guidelines delineate the Year 2000
  compliance process, testing and quality assurance guidelines, certification and
  reporting processes and contingency planning. An independent consulting company
  has reviewed the compliance program.
  
           The Company's Year 2000 compliance program has five phases: 1)
  inventory of internal IT and non-IT systems; 2) risk assessment of the Year 2000
  compliance issues associated with such internal IT and non-IT systems; 3)
  remediation of non-compliant systems; 4) testing and validation of remediated
  systems; and 5) implementation of remediated systems throughout the Company. The
  progress to date of each of these phases is as follows: 1) internal IT and
  non-IT systems have been inventoried; 2) appropriate risk assessments have been
  completed; 3) remediation of critical systems has been substantially completed
  and remediation of non-critical systems is progressing; 4) testing and
  validation of critical systems has been substantially completed; and 5) Year
  2000 compliant versions are in the process of being implemented in field
  operations. The Company anticipates completing the Year 2000 project no later
  than October 31, 1999, which is prior to any anticipated material impact on its
  operating systems.
  
           Product warranties and certifications are being sought from vendors and
  suppliers. The Company has obtained "Year 2000 Statements" from critical
  national equipment vendors including Canon, Oce, Ricoh and Sharp.
  
           Costs. The Company will use both internal and external resources to
  reprogram or replace, test and implement its IT and non-IT systems for Year 2000
  modifications. The Company does not separately track the internal costs incurred
  on the Year 2000 project. Such costs are principally payroll and related costs
  for its internal IT personnel. The total cost of the Year 2000 project,
  excluding these internal costs, is estimated at $11.4 million and is being
  funded through operating cash flows. Of the total estimated project cost,
  approximately $3.2 million is attributable to the purchase of new software and
  hardware which will be capitalized. The remaining $8.2 million will be expensed
  as incurred. Through June 30, 1999, the Company has incurred approximately $3.5
  million ($3.1 million expensed and $0.4 million capitalized) related to its Year
  2000 project.
  
           Risks. Management believes, based on the information currently
  available to it, that the most reasonably likely worse case scenario that could
  be caused by technology failures relating to the Year 2000 could pose a
  significant threat not only to the Company, its customers and suppliers, but to
  all businesses. Risks include, but are not limited to:
  
  o    Legal risks, including customer, supplier, employee or shareholder lawsuits
       over failure to deliver contracted services, product failure, or health and
       safety issues.
  o    Loss of sales due to failure to meet customer quality expectations or
       inability to ship products.
  o    Increased operational costs due to manual processing, data corruption or
       disaster recovery.
  o    Inability to bill or invoice.
  
           The Company has taken steps to limit the scope of product and service
  warranties to customers to either the replacement of noncompliant products or to
  reimbursement of the cost of the product or service provided. With respect to
  products sold by the Company prior to the inclusion of such limited warranties,
  differing interpretations of the warranties included with such products will
  likely result in litigation against the Company. The Company is not able to
  assess the impact of such potential litigation at this time.
  
  <PAGE>
  
           The Company is engaged in the provision of certain Year 2000 services
  to customers, whereby the Company evaluates the Year 2000 compliance of
  customers' software and hardware, and works with customers to find solutions to
  Year 2000 problems. The Company has taken steps to limit its warranties with
  respect to the Company's provision of such services.
  
           The cost of the project and the date on which the Company believes it
  will complete the Year 2000 modifications are based on management's best
  estimates, which were derived using numerous assumptions of future events,
  including the continued availability of certain resources and other factors.
  However, there can be no guarantee that these estimates will be achieved and
  actual results could differ materially from those anticipated. Specific factors
  that might cause such material differences include, but are not limited to, the
  availability and cost of personnel trained in this area, the ability to locate
  and correct all relevant computer codes, and other uncertainties.
  
           Contingency Plans. The Company's Guidelines require that contingency
  plans be developed and validated in the event that any critical system cannot be
  corrected and certified before the system's failure date. Contingency plans are
  currently being developed and are expected to be in place by October 31, 1999.
  In addition, the Company is forming a rapid response team as part of its IT
  group that will respond to any operational problems during the Year 2000 date
  change period.
  
                          Financial Condition and Liquidity
  
           Net cash provided by operating activities for the first nine months of
  fiscal 1999 was $266 million. During the same period, the Company used $249
  million in cash for investing activities, which included net finance subsidiary
  activity of $135 million, acquisition activity at a cash cost of $24 million,
  capital expenditures for property and equipment of $73 million and net capital
  expenditures for equipment on operating rental of $28 million. Cash provided by
  financing activities includes $44 million net decrease in corporate debt,
  excluding the effects of acquisitions, and $191 million net funding from finance
  subsidiaries debt. Debt, excluding finance subsidiaries, was $815 million at
  June 30, 1999, a decrease of $41 million from the debt balance at September 30,
  1998 of $856 million. Debt levels, excluding finance subsidiaries, were down and
  the Company has additional cash and cash equivalents on the balance sheet at
  June 30, 1999 as a result of prefunding for the U.S. finance subsidiary. The
  debt to capital ratio, excluding finance subsidiaries, was 35.1% at June 30,
  1999 (36.2% adjusted for the prefunding) compared to 37.5% at September 30,
  1998.
  
           As of June 30, 1999, the Company had no short-term borrowings under its
  $600 million credit agreement, however, the Company has a $25 million letter of
  credit supported by the facility. The Company also has $700 million available
  for either stock or debt offerings under its shelf registration statement.
  
           Finance subsidiaries debt increased by $193 million from September 30,
  1998. During the nine months ended June 30, 1999, the U.S. finance subsidiary
  repaid $386 million of its medium term notes and $100 million of bank debt and
  no new notes were issued. At June 30, 1999, $1.5 billion of medium term notes
  were outstanding with a weighted interest rate of 6.5%, while $1.1 billion
  remains available under this program. In December 1998, the U.S. finance
  subsidiary entered into a new asset securitization agreement under which it
  received cash of $250 million in December 1998. Under its previously existing
  $275 million asset securitization programs and the securitization closed in
  December 1998, the U.S. finance subsidiary sold an additional $125 million in
  direct financing leases during the first nine months of fiscal 1999, replacing
  those leases liquidated and leaving the amount of contracts sold unchanged.
  CN$37 million ($24 million) of additional leases were sold under the Canadian
  CN$175 million asset securitization agreement during the first nine months of
  fiscal 1999, replacing leases liquidated. The balance of Canadian securitized
  receivables at June 30, 1999 is CN$138 million.
  
  
  <PAGE>
  
           On May 19, 1999, IKON Receivables, LLC (an affiliate of the U.S.
  finance subsidiary) publicly issued approximately $752 million of lease-backed
  notes (the "Notes") under a $1.825 billion shelf registration statement. Class
  A-1 Notes totaling $304,474,000 have a stated interest rate of 5.11%, Class A-2
  Notes totaling $61,579,000 have a stated interest rate of 5.60%, Class A-3 Notes
  totaling $304,127,000 have a stated interest rate of 5.99% and Class A-4 Notes
  totaling $81,462,000 have a stated interest rate of 6.23%. The Notes are secured
  by a pool of leases and the payments on the Notes are made from payments on the
  leases. The Company's finance subsidiary received approximately $749 million in
  net proceeds from the sale of the Notes and used $250 million of that amount to
  repurchase assets previously sold in connection with the asset securitization
  transaction completed in December 1998. As a result of the repurchase, the $250
  million securitization commitment remains available.
  
           The Company filed a shelf registration for 10 million shares of common
  stock in April 1997. Shares issued under the registration statement are reserved
  for use in acquisition transactions. Approximately 3.4 million shares have been
  issued under this shelf registration through June 30, 1999, leaving 6.6 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 fiscal 1998, the Company repurchased 4.6
  million common shares for $113 million 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 the remaining accrued costs
  associated with the Company's transformation program.
  
                             Forward-Looking Information
  
           This Report includes or incorporates by reference information which may
  constitute forward-looking statements within the meaning of the federal
  securities laws. Although the Company believes the expectations contained in
  such forward-looking statements are reasonable, it can give no assurances that
  such expectations will prove correct. Such forward-looking information is based
  upon management's current plans or expectations and is subject to a number of
  risks and uncertainties that could significantly affect current plans,
  anticipated actions and the Company's future financial condition and results.
  These risks and uncertainties include, but are not limited to, risks and
  uncertainties relating to conducting operations in a competitive environment;
  delays, difficulties, management transitions and employment issues associated
  with consolidation of, and/or changes in business operations; managing the
  integration of existing and acquired companies; risks and uncertainties
  associated with existing or future vendor relationships; and general economic
  conditions. Certain additional risks and uncertainties are set forth in the
  Company's 1998 Annual Report on Form 10-K/A filed with the Securities and
  Exchange Commission. As a consequence of these and other risks and
  uncertainties, current plans, anticipated actions and future financial condition
  and results may differ materially 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. (27) Financial Data Schedule
  
  
       (b)  Reports on Form 8-K
  
  
               On May 5, 1999, the Company filed a Current Report on Form 8-K to
               file, under Item 5 of the form, information contained in 1) its
               press release dated April 22, 1999 regarding the appointment of
               William S. Urkiel as the Company's Chief Financial Officer and
               Senior Vice President, and 2) the press release dated April 28,
               1999 regarding the Company's financial results for the period ended
               March 31, 1999, including unaudited consolidated statements of
               income for the three months ended March 31, 1999 and the six months
               ended March 31, 1999.
  
               On May 19, 1999, the Company filed a Current Report on Form 8-K to
               file, under Item 5 of the form, information contained in its press
               release dated May 17, 1999 regarding certain organizational
               changes.
  
               On July 30, 1999, the Company filed a Current Report on Form 8-K to
               file, under Item 5 of the form, its press release dated July 28,
               1999 regarding the Company's financial results for the period ended
               June 30, 1999, including unaudited consolidated statements of
               operations for the three months ended June 30, 1999 and the nine
               months ended June 30, 1999.
  
  
  
  
  <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 13, 1999                        /s/ William S. Urkiel
        ---------------                        ---------------------
                                               William S. Urkiel
                                               Senior Vice President and
                                               Chief Financial Officer
                                               (Chief Accounting Officer)
  
  
  
  <PAGE>
                                  INDEX TO EXHIBITS
  
  
  
  Exhibit Number
  
  
  (27)     Financial Data Schedule
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 63159}]
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": "99686945"}, "business-address": {"street1": "70 VALLEY STREAM", "city": "MALVERN", "state": "PA", "zip": "19355", "phone": "6102968000"}, "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: UNITED STATES
                         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, 1999 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, 1999.
  
  Common Stock, no par value                                  149,124,413 shares
  INDEX
  
                             IKON OFFICE SOLUTIONS, INC.
  
  PART I.  FINANCIAL INFORMATION
  
       Item 1.             Financial Statements (Unaudited)
  
                           Consolidated Balance Sheets--June 30, 1999
                           and September 30, 1998
  
                           Consolidated Statements of Operations--Three and Nine
                           Months ended June 30, 1999 and June 30, 1998
  
                           Consolidated Statements of Cash Flows--Nine Months
                           ended June 30, 1999 and June 30, 1998
  
                           Notes to Consolidated Financial Statements--
                           June 30, 1999
  
       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                                                                1999             1998
  Current Assets
      Cash and cash equivalents                                    $   118,641      $       963
      Restricted cash                                                   33,433
      Accounts receivable, net                                         752,495          793,934
      Finance receivables, net                                         876,132          827,363
      Inventories                                                      381,976          431,837
      Prepaid expenses and other current assets                        110,113           97,534
      Deferred taxes                                                   111,986          112,609
                                                                   -----------      -----------
      Total current assets                                           2,384,776        2,264,240
                                                                   -----------      -----------
  
  Investments and Long-Term Receivables                                 21,502           25,109
  
  Long-Term Finance Receivables, net                                 1,661,711        1,565,674
  
  Equipment on Operating Rental, net                                    95,741          110,891
  
  Property and Equipment, at cost                                      521,430          499,546
      Less accumulated depreciation                                    266,874          239,440
                                                                   -----------      -----------
                                                                       254,556          260,106
                                                                   -----------      -----------
  
  Goodwill                                                           1,391,156        1,387,390
  
  Miscellaneous                                                        136,968          149,400
                                                                   -----------      -----------
  
                                                                   $ 5,946,410      $ 5,762,810
                                                                   ===========      ===========
  
  LIABILITIES AND SHAREHOLDERS' EQUITY
  
  Current Liabilities
      Current portion of long-term debt                            $    87,388      $    56,358
      Current portion of long-term debt,
        finance subsidiaries                                           994,786          726,159
      Notes payable                                                     10,066           87,180
      Trade accounts payable                                           185,837          245,520
      Accrued salaries, wages and commissions                          115,496          115,101
      Deferred revenues                                                197,358          211,824
      Other accrued expenses                                           321,415          326,725
                                                                   -----------      -----------
      Total current liabilities                                      1,912,346        1,768,867
                                                                   -----------      -----------
  
  Long-Term Debt                                                       717,122          712,384
  
  Long-Term Debt, Finance Subsidiaries                               1,299,112        1,374,478
  
  Deferred Taxes                                                       351,563          325,488
  
  Other Long-Term Liabilities                                          156,966          154,305
  
  Shareholders' Equity
      Series BB conversion preferred stock, no par value,
         9/98 - 3,877 depositary shares issued and outstanding                          290,170
      Common stock, no par value:
         Authorized - 300,000 shares
         Issued 6/99 - 149,193 shares;
            9/98 - 137,139 shares                                    1,007,547          689,195
      Unearned compensation                                             (6,610)
      Retained earnings                                                512,583          452,051
      Accumulated other comprehensive income                            (1,800)            (473)
      Cost of common shares in treasury: 6/99 - 79 shares;
         9/98 - 124 shares                                              (2,419)          (3,655)
                                                                   -----------      -----------
                                                                     1,509,301        1,427,288
                                                                   -----------      -----------
  
                                                                   $ 5,946,410      $ 5,762,810
                                                                   ===========      ===========
  See notes to consolidated financial statements.
  IKON OFFICE SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share amounts)
  Three Months Ended                    Nine Months Ended
                                                                   June 30                              June 30
                                                        ------------------------------       ------------------------------
                                                            1999             1998                1999             1998
                                                        --------------   -------------       --------------   -------------
  Revenues
  Net sales                                           $       719,047  $      721,044      $     2,146,828  $    2,236,092
  Service and rentals                                         586,850         594,806            1,754,734       1,740,694
  Finance income                                               79,570          78,878              252,972         223,788
                                                        --------------   -------------       --------------   -------------
                                                            1,385,467       1,394,728            4,154,534       4,200,574
                                                        --------------   -------------       --------------   -------------
  
  Costs and Expenses
  Cost of goods sold                                          500,614         520,442            1,464,723       1,490,189
  Service and rental costs                                    331,240         351,701            1,007,930       1,028,514
  Finance interest expense                                     30,553          33,171               92,539          96,876
  Selling and administrative                                  455,043         543,703            1,393,917       1,450,307
  Loss from asset impairment                                                   20,000                               20,000
  Transformation costs                                                         16,539                               54,250
                                                        --------------   -------------       --------------   -------------
                                                            1,317,450       1,485,556            3,959,109       4,140,136
                                                        --------------   -------------       --------------   -------------
  
  Operating income (loss)                                      68,017         (90,828)             195,425          60,438
  Interest expense                                             17,031          17,684               55,573          50,956
                                                        --------------   -------------       --------------   -------------
  Income (loss) before taxes                                   50,986        (108,512)             139,852           9,482
  Income taxes (benefit)                                       23,708         (19,867)              61,031          30,852
                                                        --------------   -------------       --------------   -------------
  Net Income (loss)                                            27,278         (88,645)              78,821         (21,370)
  Less:  Preferred Dividends                                                    4,885                               14,655
                                                        --------------   -------------       --------------   -------------
  Available to Common Shareholders                    $        27,278  $      (93,530)     $        78,821  $      (36,025)
                                                        ==============   =============       ==============   =============
  
  Basic and Diluted Earnings (Loss) Per Share                  $ 0.18         $ (0.69)              $ 0.53         $ (0.27)
                                                        ==============   =============       ==============   =============
  
  Cash Dividends Per Share of Common Stock                     $ 0.04          $ 0.04               $ 0.12          $ 0.12
                                                        ==============   =============       ==============   =============
  See notes to consolidated financial statements.
  IKON OFFICE SOLUTIONS, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (in thousands)
  Nine Months Ended
                                                                                                     June 30
                                                                                    -------------------------------------
                                                                                             1999              1998
                                                                                    -------------------------------------
  Operating Activities
  Net income                                                                      $       78,821    $       (21,370)
       Additions (deductions) to reconcile net income to net cash
           provided by operating activities
              Depreciation                                                                    103,040            101,219
              Amortization                                                                     45,543             50,152
              Provisions for losses on accounts receivable                                     25,743             46,421
              Provision for deferred taxes                                                     32,000             14,000
              Gain on asset securitizations                                                   (25,360)            (3,145)
              Loss from asset impairment                                                                          20,000
              Changes in operating assets and liabilities, net of effects from
                  acquisitions:
                     Decrease (increase) in accounts receivable                                21,904            (27,364)
                     Decrease (increase) in inventories                                        51,332            (26,802)
                     Decrease (increase) in prepaid expenses and other current assets           8,909            (10,445)
                     (Decrease) increase in accounts payable, deferred
                         revenues and accrued expenses                                        (85,625)            19,473
              Miscellaneous                                                                     9,779            (10,013)
                                                                                         -------------     --------------
  Net cash provided by operating activities                                                   266,086            152,126
  
  Investing activities
       Proceeds from the sale of property and equipment                                        14,644             11,658
       Cost of companies acquired, net of cash acquired                                       (24,419)           (41,186)
       Expenditures for property and equipment                                                (72,617)           (91,228)
       Expenditures for equipment on operating rental, net                                    (28,270)           (56,540)
       Purchase of miscellaneous assets                                                        (2,934)            (9,042)
       Finance receivables - additions                                                       (953,475)        (1,156,662)
       Finance receivables - collections                                                      668,678            626,042
       Proceeds from sale of finance subsidiaries' lease receivables                          399,446            162,095
       Repurchase of finance subsidiary's lease receivables                                  (250,000)
                                                                                         -------------     --------------
  Net cash used in investing activities                                                      (248,947)          (554,863)
  
  Financing activities
       Short-term borrowing repayments, net                                                   (77,114)          (172,398)
       Proceeds from issuance of long-term debt                                                56,387            259,356
       Proceeds from option exercises and sale of treasury shares                               4,803             17,566
       Long-term debt repayments                                                              (23,143)           (17,704)
       Finance subsidiaries' debt - issuance                                                  750,941            601,892
       Finance subsidiaries' debt - repayments                                               (559,991)          (267,890)
       Dividends paid                                                                         (17,743)           (30,830)
       Deposit to restricted cash                                                             (33,433)
       Purchase of treasury shares                                                               (168)            (3,963)
                                                                                         -------------     --------------
  Net cash provided by financing activities                                                   100,539            386,029
  
  Net increase (decrease) in cash and cash equivalents                                        117,678            (16,708)
  Cash at beginning of year                                                                       963             21,341
                                                                                         -------------     --------------
  Cash and cash equivalents at end of period                                           $      118,641    $         4,633
                                                                                         =============     ==============
  See notes to consolidated financial statements.
  IKON OFFICE SOLUTIONS, INC.
                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                    JUNE 30, 1999
  
  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/A for the year ended September 30, 1998.
  Certain prior year amounts have been reclassified to conform to the current year
  presentation.
  
  Note 2:  Asset Securitization
  
           In addition to the $410 million of asset securitizations in place at
  the end of fiscal 1998 in the U.S. and Canada, in December 1998, the Company's
  U.S. finance subsidiary entered into an asset securitization transaction whereby
  it sold $366.6 million in direct financing lease receivables for $250 million in
  cash and a retained interest in the remainder. The agreement is for an initial
  three-year term with certain renewal provisions and was structured as a
  revolving asset securitization so that as collections reduce previously sold
  interests in the pool of leases, additional leases can be sold up to $250
  million. The terms of the agreement provide that the Company will continue to
  service the lease portfolio for the securitization provider. The Company
  recognized a pretax gain of $14.3 million during the first quarter of fiscal
  1999 on this agreement and additional gains on the revolving portion of all
  agreements of $11.1 million, for total a total gain of $25.4 million for the
  nine months ended June 30, 1999. On May 25, 1999, the Company's U.S. finance
  subsidiary repurchased the leases sold in this transaction with the proceeds
  from the lease-backed notes described below.
  
  Note 3:  Leased-backed Notes
  
           On May 19, 1999, IKON Receivables, LLC (an affiliate of the U.S.
  finance subsidiary) publicly issued approximately $752 million of lease-backed
  notes (the "Notes") under a $1.825 billion shelf registration statement. Class
  A-1 Notes totaling $304,474,000 have a stated interest rate of 5.11%, Class A-2
  Notes totaling $61,579,000 have a stated interest rate of 5.60%, Class A-3 Notes
  totaling $304,127,000 have a stated interest rate of 5.99% and Class A-4 Notes
  totaling $81,462,000 have a stated interest rate of 6.23%. The transaction was
  structured using two special purpose limited liability companies: IKON
  Receivables-1, LLC, of which the Company's U.S. finance subsidiary is the sole
  member, and IKON Receivables, LLC, of which IKON Receivables-1, LLC is the sole
  member. The Company's U.S. finance subsidiary contributed to IKON Receivables-1,
  LLC a pool of office equipment leases or contracts and related assets (the
  "Asset Pool"), and IKON Receivables-1, LLC transferred them to IKON Receivables,
  LLC, which is the issuer of the Notes. The Notes are secured by the Asset Pool
  and the payments on the Notes are made from payments on the leases. The
  Company's U.S. finance subsidiary received approximately $749 million in net
  proceeds from the sale of the Notes and used $250 million of that amount to
  repurchase previously sold leases. The repurchased leases were contributed as
  part of the Asset Pool. Restricted cash on the balance sheet represents cash
  that has been collected on the lease receivables in the Asset Pool, which must
  be used to repay the Notes.
  
  Note 4:  Conversion of Series BB Preferred Stock
  
           On October 1, 1998, each of the outstanding depositary shares of the
  Series BB Preferred Stock automatically converted to 2.4972 shares of common
  stock per depositary share, resulting in the issuance of 9,682,143 common
  shares. The common stock account increased by $290.2 million to reflect the
  conversion. There was no change to total shareholders' equity.
  IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1999
  
  Note 5:  Transformation Costs
  
           In September 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. The
  Company substantially completed the transformation program as of September 30,
  1998. The transformation involved a variety of activities, including
  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 common benefit programs. Transformation costs in the first nine
  months of fiscal 1998 of $54.3 million relate principally to severance and other
  employee-related costs, including temporary labor ($36.7 million), facility
  consolidation costs, including lease buyouts and write-offs of leasehold
  improvements ($12.2 million), and technology conversion costs ($5.4 million).
  Cash of $9.9 million was expended during the first nine months of fiscal 1999,
  reducing the September 30, 1998 severance and lease buyout accruals to $4.0
  million and $6.2 million, respectively, at June 30, 1999.
  
  Note 6:  Comprehensive Income
  
           As of October 1, 1998, the Company adopted Statement of Financial
  Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS
  130 establishes rules for the reporting and presentation of comprehensive income
  and its components. SFAS 130 requires foreign currency translation adjustments,
  equity adjustments related to pension liabilities and mark to market adjustments
  on retained interests in lease receivables to be included in other comprehensive
  income. Equity accounts as of September 30, 1998 have been reclassified to
  conform to the requirements of SFAS 130. The adoption of SFAS 130 did not impact
  the Company's net income or total shareholders' equity.
  
           Total comprehensive income is as follows (in thousands):
  Three Months Ended            Nine Months Ended
                                                           June  30                     June 30
                                                       1999         1998           1999          1998
                                                    --------      --------      --------      --------
  Net income                                   $ 27,278      ($88,645)     $ 78,821      ($21,370)
       Foreign currency translation adjustments       (1,562)         (191)       (1,327)         (470)
       Mark to market adjustment, net of tax          (1,128)                          0
                                                    --------      --------      --------      --------
       Total comprehensive income                   $ 24,588      ($88,836)     $ 77,494      ($21,840)
                                                    ========      ========      ========      ========
  Note 7:   Income Tax Benefit
  
           During the second quarter of fiscal 1999, the Company recorded a
  one-time tax benefit of $4.0 million related to restructuring the European
  leasing operations. Excluding the one-time benefit, diluted earnings per share
  for the nine months ended June 30, 1999 would have been $.50.
  IKON OFFICE SOLUTIONS, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1999
  
  Note 8:  Earnings Per Share
  
           The following table sets forth the computation of basic and diluted
  earnings per share (in thousands):
  For the fiscal quarter ended                             6/30/99      6/30/98
       ------------------------------------------------------------------------------
       Numerator:
            Net income                                        $  27,278     $ (88,645)
            Preferred stock dividends                                           4,885
                                                              ---------     ---------
            Numerator for basic and diluted earnings
               per share - income available to
               common shareholders                            $  27,278     $ (93,530)
                                                              =========     =========
  
       Denominator:
            Weighted average shares                             148,422       135,465
            Contingently issuable shares                            365           116
                                                              ---------     ---------
            Denominator for basic earnings per
               share - weighted average shares                  148,787       135,581
  
            Effect of dilutive securities:
               Additional contingently issuable shares              157
               Employee stock options                               171
                                                              ---------
            Dilutive potential common shares                        328
            Denominator for diluted earnings per
                   share - adjusted weighted average
                   shares and assumed conversions               149,115       135,581
                                                              =========     =========
  
       Basic earnings (loss) per share                        $    0.18     ($   0.69)
                                                              =========     =========
  
       Diluted earnings (loss) per share                      $    0.18     ($   0.69)
                                                              =========     =========
  
       For the nine months ended                                6/30/99       6/30/98
       ------------------------------------------------------------------------------
       Numerator:
            Net income                                        $  78,821     $ (21,370)
            Preferred stock dividends                                          14,655
                                                              ---------     ---------
            Numerator for basic and diluted earnings
               per share - income available to
               common shareholders                            $  78,821     $ (36,025)
                                                              =========     =========
  
       Denominator:
            Weighted average shares                             147,748       134,681
            Contingently issuable shares                            828           118
                                                              ---------     ---------
            Denominator for basic earnings per
               share - weighted average shares                  148,576       134,799
  IKON OFFICE SOLUTIONS, INC
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT.)
                                    JUNE 30, 1999
  
       Note 8:  Earnings Per Share (continued)
  
       Effect of dilutive securities:
               Additional contingently issuable shares              253
               Employee stock options                               132
                                                              ---------
       Dilutive potential common shares                             385
            Denominator for diluted earnings per
                   share - adjusted weighted average
                   shares and assumed conversions               148,961       134,799
                                                              =========     =========
  
       Basic earnings (loss) per share                        $    0.53     ($   0.27)
                                                              =========     =========
  
       Diluted earnings (loss) per share                      $    0.53     ($   0.27)
                                                              =========     =========
  Options to purchase 6,319,528 shares of common stock at $14.00 per
  share to $56.42 per share were outstanding during the third quarter of fiscal
  1999 and options to purchase 3,496,536 shares of common stock at $26.53 per
  share to $62.93 per share were outstanding during the third quarter of fiscal
  1998 but were not included in the computation of diluted earnings per share
  because the options' exercise prices were greater than the average market price
  of the common shares and, therefore, the effect would be antidilutive.
  
           The Company's Series BB conversion preferred stock is excluded from the
  diluted calculation for the quarter and nine months ended June 30, 1998 because
  the effect of adding 9,682,143 shares and deleting the preferred dividends to
  reflect assumed conversion would be antidilutive.
  
  Note 9:  Shareholder Lawsuit
  
           The Company and certain current and former principal officers and
  employee directors were named as defendants in a series of purported class
  action complaints which were purportedly filed on behalf of purchasers of the
  Company's common stock. The complaints were filed in the United States District
  Court for the Eastern District of Pennsylvania following the issuance of the
  Company's August 14, 1998 earnings release. By court order dated November 30,
  1998 the Court appointed co-lead counsel. By court order dated December 3, 1998,
  all the complaints were consolidated. The consolidated complaint was filed on
  December 18, 1998 and alleges that the defendants publicly disseminated a series
  of false and misleading statements, including filings with the Securities and
  Exchange Commission, concerning the Company's revenue, profitability and
  financial condition, in violation of the federal securities law. The plaintiffs
  seek to represent a class of persons who purchased or acquired the Company's
  equity securities between January 24, 1996 and August 13, 1998. In an amended
  consolidated complaint filed on June 28, 1999, Ernst & Young LLP (the Company's
  independent auditors) was added as a defendant. The complaint seeks unspecified
  compensatory and punitive damages, prejudgment interest, attorneys' fees and
  costs. The Company has responded to the complaint and believes that the
  allegations contained therein are without merit and that the outcome of the
  proceedings will not have a material adverse effect on the financial position or
  overall trends in the results of operations of the Company. However, due to the
  inherent uncertainties of litigation, the Company cannot predict the ultimate
  outcome of these proceedings or the probability of any liability or losses
  relating thereto, and, accordingly, no provision has been made for any liability
  or loss that may result from the adjudication or settlement of these proceedings
  in the financial statements for the first nine months of fiscal 1999. An
  unfavorable outcome of these proceedings could have a material adverse impact on
  the Company's financial condition and results of operations.
  Item 2:  Management's Discussion and Analysis of Results of Operations and
  Financial Condition and Liquidity
  
           The Company sells, rents and leases photocopiers, digital printers and
  other automated office equipment for use in both traditional and integrated
  office environments. The Company also provides outsourcing and imaging services
  and offers consulting, design, computer networking and technology training for
  the networked office environment.
  
                                Results of Operations
  
           The discussion of the results of operations reviews the operations of
  the Company as reported in the Consolidated Statements of Operations.
  
                      Three and Nine Months Ended June 30, 1999
             Compared with the Three and Nine Months Ended June 30, 1998
  
           Results of operations for the third quarter and year-to-date of fiscal
  1999 compared to the third quarter and year-to-date of fiscal 1998 were as
  follows:
  Three Months Ended                      Nine Months Ended
                                                      June 30             %                June 30            %
                                                 1999        1998       Change         1999       1998      Change
  (in millions)
  REVENUES                                     $1,385      $1,395        (0.7)%       $4,155     $4,201       (1.1)%
                                               ======     =======                     ======     ======
  
  INCOME BEFORE TAXES:
  Operating income, excluding
     transformation costs                       $68.0      $(74.3)                    $195.4     $114.7       70.4%
  Transformation costs                                      (16.5)                                (54.3)
                                               ------     --------                    ------     ------
        Operating income                         68.0       (90.8)                     195.4       60.4      223.5%
  Interest expense                              (17.0)      (17.7)                     (55.5)     (50.9)
                                               ------     -------                     ------     ------
                                                $51.0     $(108.5)                    $139.9       $9.5    1,372.6%
                                               ======     ========                    ======     ======
  THIRD QUARTER:
           The Company's third quarter revenues decreased by $10 million or .7%
  from the third quarter of fiscal 1998. Revenues increased from the second
  quarter of fiscal 1999, but were down compared to the same period in the prior
  fiscal year due primarily to reductions in and realignment of the sales force,
  as well as the closure or consolidation of 22 document services branches and two
  technology services branches during fiscal 1999. These actions were taken to
  strengthen productivity, tighten marketing disciplines and build a solid
  cost-competitive infrastructure. Net sales, which includes equipment revenue,
  decreased by $2 million or .3% in the third quarter of fiscal 1999, compared to
  the third quarter of fiscal 1998. Net sales were down slightly ($1 million) from
  the second quarter of fiscal 1999. Service and rental revenue decreased by $8
  million or 1.3% compared to the third quarter fiscal 1998, but increased by $10
  million from the second quarter of fiscal 1999. Finance income increased by $.7
  million or .9% compared to the third quarter of fiscal 1998, due to the growth
  in the lease portfolio.
  
           Revenues from the Company's operations outside the U.S. were $198
  million for the third quarter of fiscal 1999 compared to $181 million for the
  same period of the prior fiscal year. European operations increased by $28
  million, due primarily to acquisitions, while Canadian revenues decreased by $10
  million and other foreign operations revenue decreased by $1 million in the
  third quarter of fiscal 1999 compared to the third quarter of fiscal 1998. There
  were no acquisitions in the third quarter of fiscal 1999.
  The Company's operating income increased by $158.8 million compared to
  the prior year's quarter. Excluding transformation costs in fiscal 1998,
  operating income increased by $142.3 million to $68.0 million for the third
  quarter of fiscal 1999 compared to a loss of $74.3 million in the third quarter
  of fiscal 1998. During August 1998, the Company completed an in-depth review of
  its operations and recorded charges against earnings totaling $94 million
  related to the third quarter of fiscal 1998 and $16 million related to the
  second quarter of fiscal 1998. Excluding the third quarter charges,
  pre-transformation operating income would have been $19.8 million in the third
  quarter of fiscal 1998, compared to $68.0 million in the third quarter of fiscal
  1999, an increase of $48.2 million. Gross margins in the third quarter of fiscal
  1999 were 37.8%, compared to 35.1% in the same period of the prior fiscal year
  (37.2% excluding the third quarter charges) and 37.6% in the second quarter of
  fiscal 1999. This increase is primarily the result of increased service margins.
  The increase in service margins reflects the growing discipline and productivity
  from the national sales model, which includes a focus on protecting and growing
  aftermarket. Improved service margins are partially offset by a decline in
  equipment margins due to continued price pressure in analog sales and to the
  closing of a portion of the Company's remanufacturing operations in June 1999.
  Selling and administrative expense as a percent of revenue was 32.9% in the
  third quarter of fiscal 1999 compared to 39.0% in the third quarter of fiscal
  1998 (35.9% excluding the third quarter charges). Selling and administrative
  expense as a percent of revenue decreased in the third quarter of fiscal 1999
  from the 33.6% in the second quarter of fiscal 1999 as a result of the ongoing
  expense reduction programs launched in the second half of fiscal 1998.
  
           Costs associated with the Company's transformation program were $16.5
  million in the third quarter of fiscal 1998. Severance and other employee costs
  were $10.0 million, facility consolidation costs were $5.4 million and
  technology conversion costs were $1.1 million. The transformation is essentially
  complete, and there are no significant transformation expenses in fiscal 1999.
  
           Operating income from foreign operations was $5.4 million for the third
  quarter of fiscal 1999, down $2.5 million from $7.9 million (excluding
  transformation costs) for the third quarter of fiscal 1998 and down slightly
  ($.3 million) from the second quarter of fiscal 1999. Canadian operating income
  increased by $.4 million compared to the third quarter of fiscal 1998, while
  European operating income decreased by $1.8 million and other foreign operations
  decreased by $1.1 million. Europe has been experiencing price discounting of
  both analog and digital products as a result of direct competition from the
  manufacturers. There was no material effect of foreign currency exchange rate
  fluctuations on the results of operations in the third quarter of fiscal 1999
  compared to the third quarter of fiscal 1998.
  
  NINE MONTHS:
           The Company's revenues for the first nine months of fiscal 1999
  decreased by $46 million or 1.1% compared to the first nine months of fiscal
  1998. The first quarter of fiscal 1999 included a $14.3 million gain from an
  asset securitization. Excluding the securitization gain, overall revenue
  decreased by $60 million compared to the first nine months of fiscal 1998. Net
  sales, which includes equipment revenue, decreased by $89 million or 4.0%
  compared to the first nine months of fiscal 1998. Service and rental revenue
  increased by $14 million or .8%. Finance income increased $15 million, or 6.6%,
  excluding the gain, due to the growth in the lease portfolio.
  
           Revenues from the Company's operations outside the U.S. were $605
  million for the first nine months of fiscal 1999 compared to $548 million for
  the same period of the prior fiscal year. European operations increased by $90
  million, due primarily to acquisitions, while Canadian revenues decreased by $31
  million and other foreign operations revenue decreased by $2 million in the
  first nine months of fiscal 1999 compared to the first nine months of fiscal
  1998. In the first quarter of fiscal 1999, the Company completed five
  acquisitions, all in Europe.
  
           The Company's operating income increased by $135.0 million in the first
  nine months of fiscal 1999 compared to the first nine months of fiscal 1998.
  Excluding transformation costs in fiscal 1998 and the gain from the asset
  securitization in fiscal 1999, operating income increased by $66.4 million to
  $181.1 million for the first nine months of fiscal 1999 compared to $114.7
  million for the first nine months of the prior fiscal year. Year to date
  operating income for fiscal 1998 was impacted by the $110 million of charges
  noted above.
  Costs associated with the Company's transformation program were $54.3
  million in the first nine months of fiscal 1998. Severance and other employee
  costs were $36.7 million, facility consolidation costs were $12.2 million and
  technology conversion costs were $5.4 million. The transformation is essentially
  complete and there are no significant transformation expenses in fiscal 1999.
  
           Operating income from foreign operations was $14.6 million for the
  first nine months of fiscal 1999, down $16.7 million from $31.3 million
  (excluding transformation costs) for the first nine months of fiscal 1998.
  European operations decreased by $6.6 million compared to the same period in the
  prior fiscal year, while Canadian operating income decreased by $8.0 million and
  other foreign operations decreased by $2.1 million. There was no material effect
  of foreign currency exchange rate fluctuations on the results of operations in
  the first nine months of fiscal 1999 compared to the first nine months of fiscal
  1998.
  
  Other
           Interest expense decreased by $.7 million in the third quarter of
  fiscal 1999 compared to the third quarter of fiscal 1998 but increased by $4.6
  million in the first nine months of fiscal 1999 compared to the first nine
  months of fiscal 1998. The increased expense year-to-date is due primarily to
  higher debt levels in the first half of fiscal 1999.
  
           Income before taxes increased by $159.5 million in the third quarter of
  fiscal 1999 and $130.4 million in the first nine months of fiscal 1999 compared
  to the comparable periods in the prior fiscal year, primarily as a result of the
  $110 million of charges in fiscal 1998 and the transformation costs in fiscal
  1998. The effective income tax rate for the first nine months of fiscal 1999 is
  43.6% compared to 325.3% for the same period in fiscal 1998. Income tax expense
  in fiscal 1999 includes a one-time tax benefit related to restructuring the
  European leasing operations in the second quarter. Excluding this one-time
  benefit, the year-to-date effective tax rate would have been 46.5%. The unusual
  effective tax rate of 325.3% in the first nine months of fiscal 1998 is the
  result of the impact of non-tax deductible items (primarily goodwill
  amortization and loss from asset impairment) in relation to lower income before
  taxes.
  
           Diluted earnings per common share increased from $(.69) per share for
  the third quarter of fiscal 1998 to $.18 per share for the third quarter of
  fiscal 1999. Excluding transformation costs and special charges, diluted
  earnings per common share were $(.11) per share in the third quarter of fiscal
  1998. Diluted earnings per common share increased from $(.27) per share for the
  first nine months of fiscal 1998 to $.53 per share for the first nine months of
  fiscal 1999. Excluding the after-tax gain on the asset securitization that was
  completed in December 1998, diluted earnings per common share were $.47 in the
  first nine months of fiscal 1999. Diluted weighted average shares increased by
  14.2 million for the nine months ended June 30, 1999 primarily as a result of
  the conversion of the Series BB preferred stock on October 1, 1998 (9.7 million
  weighted shares) and the full period impact of 1998 common share issuances
  related to acquisitions (3.7 million weighted shares).
  
  Impact of Year 2000
  
           State of Readiness. The Year 2000 issue arises from computer programs
  being written using two digits rather than four to define the applicable year.
  Any of the Company's computer programs or hardware that have date-sensitive
  software or embedded technology (non-IT systems) may recognize a date using "00"
  as the year 1900 rather than the year 2000. This could result in a system
  failure or miscalculations causing disruptions of operations, including, among
  other things, a temporary inability to process transactions, send invoices, or
  engage in similar normal business activities. The potential for a problem exists
  with all computer hardware and software, as well as in products with embedded
  technology: copiers and fax machines; security and HVAC systems; voice/telephony
  systems; elevators, etc.
  The Company has appointed a Year 2000 Corporate Compliance Team, which
  has prepared an international compliance program for the Company and is
  responsible for coordinating and inspecting compliance activities in all
  business units. The compliance program requires all business units and locations
  in every country to inventory potentially affected systems and products, assess
  risk, take any required corrective actions, test and certify compliance. The
  Company's Year 2000 Testing and Certification Guidelines delineate the Year 2000
  compliance process, testing and quality assurance guidelines, certification and
  reporting processes and contingency planning. An independent consulting company
  has reviewed the compliance program.
  
           The Company's Year 2000 compliance program has five phases: 1)
  inventory of internal IT and non-IT systems; 2) risk assessment of the Year 2000
  compliance issues associated with such internal IT and non-IT systems; 3)
  remediation of non-compliant systems; 4) testing and validation of remediated
  systems; and 5) implementation of remediated systems throughout the Company. The
  progress to date of each of these phases is as follows: 1) internal IT and
  non-IT systems have been inventoried; 2) appropriate risk assessments have been
  completed; 3) remediation of critical systems has been substantially completed
  and remediation of non-critical systems is progressing; 4) testing and
  validation of critical systems has been substantially completed; and 5) Year
  2000 compliant versions are in the process of being implemented in field
  operations. The Company anticipates completing the Year 2000 project no later
  than October 31, 1999, which is prior to any anticipated material impact on its
  operating systems.
  
           Product warranties and certifications are being sought from vendors and
  suppliers. The Company has obtained "Year 2000 Statements" from critical
  national equipment vendors including Canon, Oce, Ricoh and Sharp.
  
           Costs. The Company will use both internal and external resources to
  reprogram or replace, test and implement its IT and non-IT systems for Year 2000
  modifications. The Company does not separately track the internal costs incurred
  on the Year 2000 project. Such costs are principally payroll and related costs
  for its internal IT personnel. The total cost of the Year 2000 project,
  excluding these internal costs, is estimated at $11.4 million and is being
  funded through operating cash flows. Of the total estimated project cost,
  approximately $3.2 million is attributable to the purchase of new software and
  hardware which will be capitalized. The remaining $8.2 million will be expensed
  as incurred. Through June 30, 1999, the Company has incurred approximately $3.5
  million ($3.1 million expensed and $0.4 million capitalized) related to its Year
  2000 project.
  
           Risks. Management believes, based on the information currently
  available to it, that the most reasonably likely worse case scenario that could
  be caused by technology failures relating to the Year 2000 could pose a
  significant threat not only to the Company, its customers and suppliers, but to
  all businesses. Risks include, but are not limited to:
  
  o    Legal risks, including customer, supplier, employee or shareholder lawsuits
       over failure to deliver contracted services, product failure, or health and
       safety issues.
  o    Loss of sales due to failure to meet customer quality expectations or
       inability to ship products.
  o    Increased operational costs due to manual processing, data corruption or
       disaster recovery.
  o    Inability to bill or invoice.
  
           The Company has taken steps to limit the scope of product and service
  warranties to customers to either the replacement of noncompliant products or to
  reimbursement of the cost of the product or service provided. With respect to
  products sold by the Company prior to the inclusion of such limited warranties,
  differing interpretations of the warranties included with such products will
  likely result in litigation against the Company. The Company is not able to
  assess the impact of such potential litigation at this time.
  The Company is engaged in the provision of certain Year 2000 services
  to customers, whereby the Company evaluates the Year 2000 compliance of
  customers' software and hardware, and works with customers to find solutions to
  Year 2000 problems. The Company has taken steps to limit its warranties with
  respect to the Company's provision of such services.
  
           The cost of the project and the date on which the Company believes it
  will complete the Year 2000 modifications are based on management's best
  estimates, which were derived using numerous assumptions of future events,
  including the continued availability of certain resources and other factors.
  However, there can be no guarantee that these estimates will be achieved and
  actual results could differ materially from those anticipated. Specific factors
  that might cause such material differences include, but are not limited to, the
  availability and cost of personnel trained in this area, the ability to locate
  and correct all relevant computer codes, and other uncertainties.
  
           Contingency Plans. The Company's Guidelines require that contingency
  plans be developed and validated in the event that any critical system cannot be
  corrected and certified before the system's failure date. Contingency plans are
  currently being developed and are expected to be in place by October 31, 1999.
  In addition, the Company is forming a rapid response team as part of its IT
  group that will respond to any operational problems during the Year 2000 date
  change period.
  
                          Financial Condition and Liquidity
  
           Net cash provided by operating activities for the first nine months of
  fiscal 1999 was $266 million. During the same period, the Company used $249
  million in cash for investing activities, which included net finance subsidiary
  activity of $135 million, acquisition activity at a cash cost of $24 million,
  capital expenditures for property and equipment of $73 million and net capital
  expenditures for equipment on operating rental of $28 million. Cash provided by
  financing activities includes $44 million net decrease in corporate debt,
  excluding the effects of acquisitions, and $191 million net funding from finance
  subsidiaries debt. Debt, excluding finance subsidiaries, was $815 million at
  June 30, 1999, a decrease of $41 million from the debt balance at September 30,
  1998 of $856 million. Debt levels, excluding finance subsidiaries, were down and
  the Company has additional cash and cash equivalents on the balance sheet at
  June 30, 1999 as a result of prefunding for the U.S. finance subsidiary. The
  debt to capital ratio, excluding finance subsidiaries, was 35.1% at June 30,
  1999 (36.2% adjusted for the prefunding) compared to 37.5% at September 30,
  1998.
  
           As of June 30, 1999, the Company had no short-term borrowings under its
  $600 million credit agreement, however, the Company has a $25 million letter of
  credit supported by the facility. The Company also has $700 million available
  for either stock or debt offerings under its shelf registration statement.
  
           Finance subsidiaries debt increased by $193 million from September 30,
  1998. During the nine months ended June 30, 1999, the U.S. finance subsidiary
  repaid $386 million of its medium term notes and $100 million of bank debt and
  no new notes were issued. At June 30, 1999, $1.5 billion of medium term notes
  were outstanding with a weighted interest rate of 6.5%, while $1.1 billion
  remains available under this program. In December 1998, the U.S. finance
  subsidiary entered into a new asset securitization agreement under which it
  received cash of $250 million in December 1998. Under its previously existing
  $275 million asset securitization programs and the securitization closed in
  December 1998, the U.S. finance subsidiary sold an additional $125 million in
  direct financing leases during the first nine months of fiscal 1999, replacing
  those leases liquidated and leaving the amount of contracts sold unchanged.
  CN$37 million ($24 million) of additional leases were sold under the Canadian
  CN$175 million asset securitization agreement during the first nine months of
  fiscal 1999, replacing leases liquidated. The balance of Canadian securitized
  receivables at June 30, 1999 is CN$138 million.
  On May 19, 1999, IKON Receivables, LLC (an affiliate of the U.S.
  finance subsidiary) publicly issued approximately $752 million of lease-backed
  notes (the "Notes") under a $1.825 billion shelf registration statement. Class
  A-1 Notes totaling $304,474,000 have a stated interest rate of 5.11%, Class A-2
  Notes totaling $61,579,000 have a stated interest rate of 5.60%, Class A-3 Notes
  totaling $304,127,000 have a stated interest rate of 5.99% and Class A-4 Notes
  totaling $81,462,000 have a stated interest rate of 6.23%. The Notes are secured
  by a pool of leases and the payments on the Notes are made from payments on the
  leases. The Company's finance subsidiary received approximately $749 million in
  net proceeds from the sale of the Notes and used $250 million of that amount to
  repurchase assets previously sold in connection with the asset securitization
  transaction completed in December 1998. As a result of the repurchase, the $250
  million securitization commitment remains available.
  
           The Company filed a shelf registration for 10 million shares of common
  stock in April 1997. Shares issued under the registration statement are reserved
  for use in acquisition transactions. Approximately 3.4 million shares have been
  issued under this shelf registration through June 30, 1999, leaving 6.6 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 fiscal 1998, the Company repurchased 4.6
  million common shares for $113 million 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 the remaining accrued costs
  associated with the Company's transformation program.
  
                             Forward-Looking Information
  
           This Report includes or incorporates by reference information which may
  constitute forward-looking statements within the meaning of the federal
  securities laws. Although the Company believes the expectations contained in
  such forward-looking statements are reasonable, it can give no assurances that
  such expectations will prove correct. Such forward-looking information is based
  upon management's current plans or expectations and is subject to a number of
  risks and uncertainties that could significantly affect current plans,
  anticipated actions and the Company's future financial condition and results.
  These risks and uncertainties include, but are not limited to, risks and
  uncertainties relating to conducting operations in a competitive environment;
  delays, difficulties, management transitions and employment issues associated
  with consolidation of, and/or changes in business operations; managing the
  integration of existing and acquired companies; risks and uncertainties
  associated with existing or future vendor relationships; and general economic
  conditions. Certain additional risks and uncertainties are set forth in the
  Company's 1998 Annual Report on Form 10-K/A filed with the Securities and
  Exchange Commission. As a consequence of these and other risks and
  uncertainties, current plans, anticipated actions and future financial condition
  and results may differ materially 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. (27) Financial Data Schedule
  
       (b)  Reports on Form 8-K
  
               On May 5, 1999, the Company filed a Current Report on Form 8-K to
               file, under Item 5 of the form, information contained in 1) its
               press release dated April 22, 1999 regarding the appointment of
               William S. Urkiel as the Company's Chief Financial Officer and
               Senior Vice President, and 2) the press release dated April 28,
               1999 regarding the Company's financial results for the period ended
               March 31, 1999, including unaudited consolidated statements of
               income for the three months ended March 31, 1999 and the six months
               ended March 31, 1999.
  
               On May 19, 1999, the Company filed a Current Report on Form 8-K to
               file, under Item 5 of the form, information contained in its press
               release dated May 17, 1999 regarding certain organizational
               changes.
  
               On July 30, 1999, the Company filed a Current Report on Form 8-K to
               file, under Item 5 of the form, its press release dated July 28,
               1999 regarding the Company's financial results for the period ended
               June 30, 1999, including unaudited consolidated statements of
               operations for the three months ended June 30, 1999 and the nine
               months ended June 30, 1999.
  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 13, 1999                        /s/ William S. Urkiel
        ---------------                        ---------------------
                                               William S. Urkiel
                                               Senior Vice President and
                                               Chief Financial Officer
                                               (Chief Accounting Officer)
  INDEX TO EXHIBITS
  
  Exhibit Number
  
  (27)     Financial Data Schedule