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 0-20405
  
                                  IOS CAPITAL, INC.
               (Exact name of registrant as specified in its charter)
  
             DELAWARE                                    23-2493042
  (State or other jurisdiction of                    (I.R.S. Employer
  incorporation or organization)                      Identification No.)
  
                        1738 Bass Road, Macon, Georgia 31210
                      (Address of principal executive offices)
                                     (Zip Code)
  
                                   (912) 471-2300
                (Registrant's telephone number, including area code)
  
  
                (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, $.01 par value per share                            1,000 shares
  Registered Debt Outstanding as of July 31, 1999              $2,065,956,059.06
  
  The registrant,  an indirect wholly owned  subsidiary of IKON Office  Solutions,
  Inc. ("IKON"), meets the conditions set forth in General Instruction H(1)(a) and
  (b) of Form 10-Q and is,  therefore,  filing with the reduced  disclosure format
  contemplated thereby.
  
  <PAGE>
                                        INDEX
  
                                  IOS CAPITAL, INC.
  
  
  PART I.  FINANCIAL INFORMATION
  
  
        Item 1.              Financial Statements (Unaudited)
  
                             Balance Sheets--June 30, 1999 and
                             September 30, 1998
  
                             Statements of Income--Three and Nine Months ended
                             June 30, 1999 and June 30, 1998
  
                             Statements of Cash Flows--Nine Months ended
                             June 30, 1999 and June 30, 1998
  
                             Notes to Financial Statements--June 30, 1999
  
  
        Item 2.              Management's Discussion and Analysis of
                             Financial Condition and Results of Operations
  
  
  PART II.  OTHER INFORMATION
  
  
        Item 6.              Exhibits and Reports on Form 8-K
  
  
  
  SIGNATURES
  
  
  
  <PAGE>
                           PART I . FINANCIAL INFORMATION
  
  
  Item 1: Financial Statements (unaudited)
  
  
                                  IOS CAPITAL, INC.
                                   BALANCE SHEETS
                 (in thousands, except share and per share amounts)
  
  <TABLE>
  <CAPTION>
                                                          June 30,      September 30,
                                                           1999             1998
                                                       -----------      -----------
  Assets
  
  Investment in leases:
  <S>                                                  <C>              <C>
       Direct financing leases                         $ 2,197,509      $ 2,002,012
       Less: Unearned income                              (354,017)        (343,211)
                                                       -----------      -----------
                                                         1,843,492        1,658,801
       Funded leases, net                                  530,952          592,827
                                                       -----------      -----------
                                                         2,374,444        2,251,628
  
  Cash                                                                        2,621
  Restricted cash                                           33,433
  Accounts receivable                                       80,957           63,066
  Due  from  IKON                                          159,613           52,060
  Prepaid expenses and other assets                         13,786           14,224
  Leased equipment-operating rentals at cost
       less accumulated depreciation of:
       6/99 - $53,245; 9/98 - $43,411                       53,799           76,551
  Property and equipment at cost, less
       accumulated depreciation of:
       6/99 - $6,934; 9/98 - $5,596                         10,171           11,491
                                                       -----------      -----------
  Total assets                                         $ 2,726,203      $ 2,471,641
                                                       ===========      ===========
  
  Liabilities and shareholder's equity
  
  Liabilities:
       Accounts payable and accrued expenses           $    63,230      $    59,206
       Accrued interest                                      6,753           33,467
       Notes payable to banks                                               100,000
       Medium term notes                                 1,463,850        1,849,750
       Lease-backed notes                                  696,537
       Deferred income taxes                               124,291           95,115
                                                       -----------      -----------
  Total liabilities                                      2,354,661        2,137,538
  
  Shareholder's equity:
       Common Stock - $.01 par value, 1,000 shares
           authorized, issued, and outstanding
       Contributed capital                                 119,415          149,415
       Retained earnings                                   252,127          184,688
                                                       -----------      -----------
  Total shareholder's equity                               371,542          334,103
                                                       -----------      -----------
  Total liabilities and shareholder's equity           $ 2,726,203      $ 2,471,641
                                                       ===========      ===========
  </TABLE>
  
  
  See notes to financial statements.
  <PAGE>
                                  IOS CAPITAL, INC.
                                STATEMENTS OF INCOME
                                   (in thousands)
  
  <TABLE>
  <CAPTION>
                                                                  Three Months Ended                        Nine Months Ended
                                                                        June 30                                   June 30
                                                            --------------------------------         ---------------------------------
                                                                 1999               1998                  1999               1998
                                                            -------------      -------------         --------------     --------------
  Revenues:
  <S>                                                            <C>                <C>                   <C>                <C>
       Lease finance income                                      $54,513            $56,904               $166,363           $163,170
       Rental income                                               8,723             10,138                 27,760             28,287
       Interest on IKON tax deferrals                              4,361              3,944                 12,836             11,449
       Other income                                                5,486              3,035                 12,900              8,400
                                                            -------------      -------------         --------------     --------------
                                                                  73,083             74,021                219,859            211,306
  
  Expenses:
       Interest                                                   28,339             27,382                 84,148             80,455
       General and administrative                                 15,470             17,658                 48,014             53,401
                                                            -------------      -------------         --------------     --------------
                                                                  43,809             45,040                132,162            133,856
  
  Gain on sale of lease receivables                                3,477                710                 24,356              1,891
                                                            -------------      -------------         --------------     --------------
  
  
  Income before income taxes                                      32,751             29,691                112,053             79,341
  
  Provision for income taxes                                      11,307             12,471                 44,614             32,828
                                                            -------------      -------------         --------------     --------------
  
  Net income                                                     $21,444            $17,220                $67,439            $46,513
                                                            =============      =============         ==============     ==============
  </TABLE>
  
  
  
  See notes to financial statements.
  
  <PAGE>
  
                                  IOS CAPITAL, INC.
                              STATEMENTS OF CASH FLOWS
                                   (in thousands)
  
  <TABLE>
  <CAPTION>
                                                                                             Nine Months Ended
                                                                                                  June 30,
                                                                                 -------------------------------------------
                                                                                         1999                    1998
                                                                                 -------------------      ------------------
  Operating activities:
  <S>                                                                                       <C>                     <C>
  Net income                                                                                $67,439                 $46,513
  Adjustments to reconcile net income to net
        cash provided by operating activities:
             Depreciation and amortization                                                   25,401                  25,239
             Provision for deferred taxes                                                    29,176                  36,706
             Gain on sale of leases receivables                                             (24,356)                 (1,891)
             Changes in operating assets and liabilities:
                 Accounts receivable                                                        (17,891)                 (2,764)
                 Prepaid expenses and other assets                                           17,436                   2,528
                 Accounts payable and accrued expenses                                        2,301                  (4,967)
                 Accrued interest                                                           (26,714)                (21,431)
                                                                                 -------------------      ------------------
                                        Net cash provided                                    72,792                  79,933
                                                                                 -------------------      ------------------
  
  Investing activities:
  Purchases of leased equipment, net                                                           (529)                (43,917)
  Purchases of property and equipment, net                                                      (18)                 (1,009)
  Investment in Leases
        Additions                                                                        (1,128,360)             (1,287,825)
        Cancellations                                                                       257,133                 259,893
        Collections                                                                         633,879                 588,237
        Proceeds from sale                                                                  375,142                  78,836
        Repurchase of leases sold                                                          (250,000)                      0
                                                                                 -------------------      ------------------
                                        Net cash used                                      (112,753)               (405,785)
                                                                                 -------------------      ------------------
  
  Financing activities:
  Proceeds from bank borrowings                                                                   0                 200,000
  Payments on bank borrowings                                                              (100,000)                      0
  Proceeds from issuance of medium term notes                                                     0                 348,500
  Payments on medium term notes                                                            (385,900)               (216,000)
  Proceeds from issuance of lease-backed notes                                              749,331                       0
  Payments on lease-backed notes                                                            (55,105)                      0
  Deposit to restricted cash                                                                (33,433)                      0
  Capital contributed by IKON                                                                     0                   5,000
  Dividend to IKON                                                                          (30,000)                      0
                                                                                 -------------------      ------------------
                                        Net cash provided                                   144,893                 337,500
                                                                                 -------------------      ------------------
  
  Increase in cash and amounts due from IKON                                                104,932                  11,648
  Cash and Due from IKON at beginning of year                                                54,681                   4,463
                                                                                 -------------------      ------------------
  Due from IKON at end of period                                                           $159,613                 $16,111
                                                                                 ===================      ==================
  </TABLE>
  
  
  
  See notes to financial statements.
  
  <PAGE>
                                  IOS Capital, Inc.
                            Notes to Financial Statements
                                    June 30, 1999
  
  Note 1:    Basis of Presentation
  
             The accompanying  unaudited condensed 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 financial statements and
  footnotes  thereto  included in the  Company's  report on Form 10-K for the year
  ended September 30, 1998.  Certain prior year amounts have been  reclassified to
  conform with the current year presentation.
  
  
  Note 2:    Medium Term Note Program
  
             During the nine months ended June 30, 1999,  IOS Capital,  Inc.  (the
  "Company")  issued no medium term notes under its $3.5 billion  medium term note
  program.  At  June  30,  1999,  $1,463.9  million  of  medium  term  notes  were
  outstanding  with a weighted average interest rate of 6.5%. The remaining amount
  available under this program is $1,123.3 million.
  
  
  Note 3: Asset Securitization
  
           In December  1998,  the Company  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 this new pool of leases,  additional  leases can be
  sold up to $250  million.  The terms of the  agreement  require that the Company
  continue to service the lease portfolio. The Company recognized a pretax gain of
  $14.3 million during the first quarter of fiscal 1999 on this agreement.  On May
  25, 1999, the Company  repurchased the leases sold in this  transaction with the
  proceeds from the lease-backed notes described below.
  
           The Company has  additional  asset  securitization  agreements for $275
  million of eligible direct financing receivables that expire in March 2000 ($125
  million)  and  September  1999  ($150  million).  Both of these  agreements  are
  expected  to  be  renewed.   These   agreements   are  structured  as  revolving
  securitizations, whereby additional leases can be sold as collections reduce the
  previously  sold  interests.  During  the first  nine  months  of  fiscal  1999,
  collections  reduced  previously  sold interests on these two agreements and the
  $250 million  transaction,  described above, by $125.1 million. The Company sold
  an  additional  $125.1  million  in net  eligible  direct  financing  leases and
  recognized  pretax  gains of $10.1  million for the nine  months  ended June 30,
  1999.
  
  
  
  <PAGE>
  
  
                                  IOS Capital, Inc.
                        Notes to Financial Statements (Cont.)
                                    June 30, 1999
  
  Note 4: Lease-backed Notes
  
           On May 19, 1999,  IKON  Receivables,  LLC (an affiliate of the Company)
  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 is the sole  member,  and IKON  Receivables,  LLC, of which
  IKON  Receivables-1,  LLC is the sole member.  The Company  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 received approximately $749 million in net proceeds from the sale of
  the Notes and used $250  million of that amount to  repurchase  previously  sold
  assets in  connection  with the asset  securitization  transaction  completed in
  December  1998.  The  repurchased  assets 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 5:  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 mark to market adjustments on the retained
  interest on lease receivables to be included in other comprehensive income.
  
           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                                                  $21,444         $17,220       $67,439     $46,513
           Mark to market adjustment, net of tax                       (1,128)                             0
                                                                       -------         -------       -------     -------
           Total comprehensive income                                  $20,316         $17,220       $67,439     $46,513
                                                                       =======       =========    ==========     =======
  </TABLE>
  
  
  <PAGE>
  Item 2: Management's Discussion and Analysis of Financial Condition and
  Results of Operations
  
  
  Pursuant to General  Instruction H(2)(a) of Form 10-Q, the following analysis of
  the results of operations is presented in lieu of  Management's  Discussion  and
  Analysis of Financial Condition and Results of Operations.
  
  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.
  
  IKON has appointed a Year 2000 Corporate  Compliance  Team, which has prepared a
  compliance  program  for all  business  units,  including  the  Company,  and is
  responsible  for  coordination  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.  IKON'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 of
  critical  systems 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.
  
  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 $1.4 million and is being funded
  through operating cash flows, all of which will be expensed as incurred. Through
  June 30, 1999, the Company has expensed approximately $833,000 related to its
  Year 2000 project.
  
  
  <PAGE>
  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,  IKON,  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 revenues due to failure to meet customer quality expectations.
  o    Increased  operational costs due to manual  processing,  data corruption or
       disaster recovery.
  o    Inability to bill or invoice.
  
  The cost of the project  and the date on which IKON and the  Company  believe it
  will  complete  the Year  2000  modifications  are  based in  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. IKON'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. The Company and IKON expect to have
  contingency  plans in place by October 31, 1999. In addition,  IKON 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.
  
  
                     Three Months Ended June 30, 1999 Compared
                      with the Three Months Ended June 30, 1998
  
  Comparative summarized results of operations for the three months ended June 30,
  1999 and 1998 are set  forth in the  table  below.  This  table  also  shows the
  increase or decrease in the dollar  amounts of major  revenue and expense  items
  between periods, as well as the related percentage increase or decrease.
  <TABLE>
  <CAPTION>
                                                              Three Months
  (dollars in thousands)                                      Ended June 30               Increase (Decrease)
                                                          1999              1998           Amount        Percent
                                                          ----              ----           ------        -------
  Revenues:
  <S>                                                    <C>               <C>           <C>               <C>
       Lease finance income                              $54,513           $56,904       $  (2,391)        (4.2)%
       Rental income                                       8,723            10,138          (1,415)       (14.0)%
       Interest on IKON tax deferrals                      4,361             3,944             417         10.6%
       Other income                                        5,486             3,035           2,451         80.8%
                                                       ---------         ---------       ---------
                                                          73,083            74,021            (938)        (1.3)%
  
  Expenses:
       Interest                                           28,339            27,382             957          3.5%
       General and administrative                         15,470            17,658          (2,188)       (12.4)%
                                                       ---------         ---------       ---------
                                                          43,809            45,040          (1,231)        (2.7)%
  
  Gain on sale of lease receivables                        3,477               710           2,767        389.7%
                                                       ---------         ---------       ---------
  
  Income before income taxes                              32,751            29,691           3,060         10.3%
  Provision for income taxes                              11,307            12,471          (1,164)        (9.3)%
                                                       ---------            ------       ---------
  Net income                                          $   21,444        $   17,220      $    4,224         24.5%
                                                       =========         =========       =========
  </TABLE>
  
  <PAGE>
  
  Revenues
  
  Total revenues decreased by approximately  $938,000 or 1.3% in the third quarter
  of fiscal  1999  compared to the third  quarter of fiscal  1998.  Lease  finance
  income decreased by approximately  $2.4 million due to the effect of the sale of
  $366.6  million  in direct  financing  leases in  December  1998  under an asset
  securitization  transaction.  The lease portfolio, net of lease receivables sold
  in asset securitization  transactions,  increased by 7.9 % from June 30, 1998 to
  June 30, 1999.
  
  Office  equipment placed on rental by the IKON  marketplaces to customers,  with
  cancelable  terms, may be purchased by the Company.  During the third quarter of
  fiscal 1999, the Company  purchased  operating  lease  equipment of $.3 million,
  compared to $17.1 million in the third quarter of fiscal 1998.  Operating leases
  contributed  $8.7 million in rental  income  during the third  quarter of fiscal
  1999,  compared to $10.1 million in the third quarter of fiscal 1998.  Effective
  October 1, 1998, the Company has limited the funding of rental  equipment to the
  IKON marketplaces to select accounts.
  
  The Company earns  interest  income on the deferred tax  liabilities of the IKON
  marketplaces  associated  with  leases  funded  through  the  Company  at a rate
  consistent  with  the  Company's  weighted  average  outside  borrowing  rate of
  interest.  The  Company's  average rate was 6.4% for the third quarter of fiscal
  1999  compared to 6.5% for the third  quarter of fiscal  1998.  The deferred tax
  base upon  which  these  payments  are  calculated  increased  by 1.1% to $262.2
  million at June 30, 1999 from $259.4  million at June 30,  1998.  Primarily as a
  result of the increased  deferred tax  liabilities,  interest income on deferred
  taxes rose by $418,000 or 10.6% when  comparing  the three months ended June 30,
  1999 to the three months ended June 30, 1998.
  
  Other income  consists  primarily of late  payment  charges and various  billing
  fees.  The growth in other  income from fees is primarily  due to the  increased
  size of the lease portfolio, including securitized leases, upon which these fees
  are based. Overall, fee income from these sources grew by $2.5 million or 80.8%,
  when  comparing  the third  quarter of fiscal  1999 to the same period of fiscal
  1998.
  
  Expenses
  
  Borrowings  to finance the lease  portfolio  in the form of loans from banks and
  the issuance of medium term notes and  lease-backed  notes in the public  market
  increased by 13.7% from the prior year,  with $2,160.4  million  outstanding  at
  June  30,  1999.  The  Company  paid a  weighted  average  interest  rate on all
  borrowings  of 6.4% in the third quarter of fiscal 1999 compared to 6.5% for the
  third  quarter of fiscal 1998. As a result of the  lease-backed  notes issued in
  May 1999,  interest expense  increased by $957,000,  or 3.5%, when comparing the
  third  quarter of fiscal 1999 to the third  quarter of fiscal 1998.  At June 30,
  1999, the Company's  debt to equity ratio,  including  intercompany  amounts due
  from IKON, was 5.4 to 1.
  
  Total  general and  administrative  expenses for the quarter ended June 30, 1999
  decreased by $2.2 million or 12.4%, compared to the quarter ended June 30, 1998.
  The general and  administrative  expense category in the third quarter of fiscal
  1999 includes  depreciation  expense on leased equipment  totaling $7.3 million,
  compared to $8.5  million for the third  quarter of fiscal  1998.  In  addition,
  lease bonus subsidy payments included in the general and administrative  expense
  category  were $3.1 million in the third quarter of fiscal 1999 compared to $3.7
  million  in  the  third  quarter  of  fiscal  1998.  Excluding  the  effects  of
  depreciation  expense on operating  leases and a decrease in lease bonus subsidy
  payments, remaining general and administrative expenses decreased by $318,000 or
  5.8%,  when  comparing  the third quarter of fiscal 1999 to the third quarter of
  fiscal 1998.
  
  
  <PAGE>
  
  
  Gain on Sale of Lease Receivables
  
  The Company has asset  securitization  agreements  for $525  million of eligible
  direct financing  receivables.  These agreements  expire in September 1999 ($150
  million),   March  2000  ($125  million)  and  November  2001  ($250   million),
  respectively.  The March and  September  agreements  totaling  $275  million are
  expected  to  be  renewed.   The   agreements   are   structured   as  revolving
  securitizations, whereby additional leases can be sold as collections reduce the
  previously sold interests.  During the third quarter of fiscal 1999, collections
  reduced  previously  sold  interests on all  securitization  agreements by $42.1
  million.  The Company sold an additional  $42.1  million in net eligible  direct
  financing leases and recognized  pretax gains of $3.5 million.  On May 25, 1999,
  $250 million of assets  securitized  under the agreement  expiring November 2001
  were repurchased by the Company with the proceeds of the lease-backed  notes. As
  a result of the repurchase, the $250 million commitment remains available.
  
  Income Before Income Taxes
  
  Income  before  income taxes for the third  quarter of fiscal 1999  increased by
  $3.1 million or 10.3% over the third  quarter of fiscal 1998.  This  increase in
  income  before  income taxes was  essentially  the effect of the increase in the
  gains on the sale of lease receivables and decreased general and  administrative
  expenses, offset by additional interest expense and a reduction in revenue.
  
  Provision for Income Taxes
  
  Income taxes for the third  quarter of fiscal 1999  decreased by $1.2 million or
  9.3% over the third  quarter of fiscal  1998.  This  decrease in income taxes is
  primarily a result of a decrease in the  effective tax rate in the third quarter
  of fiscal 1999 compared to the third  quarter of fiscal 1998.  The effective tax
  rate was  34.5%  for the  third  quarter  of  fiscal  1999 and 42% for the third
  quarter of 1998.
  
                      Nine Months Ended June 30, 1999 Compared
                      with the Nine Months Ended June 30, 1998
  
  Comparative  summarized results of operations for the nine months ended June 30,
  1999 and 1998 are set  forth in the  table  below.  This  table  also  shows the
  increase or decrease in the dollar  amounts of major  revenue and expense  items
  between periods, as well as the related percentage increase or decrease.
  <TABLE>
  <CAPTION>
                                                               Nine Months
  (dollars in thousands)                                      Ended June 30               Increase (Decrease)
                                                          1999              1998           Amount        Percent
                                                          ----              ----           ------        -------
  Revenues:
  <S>                                                   <C>               <C>               <C>             <C>
       Lease finance income                             $166,363          $163,170          $3,193          2.0%
       Rental income                                      27,760            28,287            (527)        (1.9)%
       Interest on IKON tax deferrals                     12,836            11,449           1,387         12.1%
       Other income                                       12,900             8,400           4,500         53.6%
                                                       ---------         ---------       ---------
                                                         219,859           211,306           8,553          4.0%
  
  Expenses:
       Interest                                           84,148            80,455           3,693          4.6%
       General and administrative                         48,014            53,401          (5,387)       (10.1)%
                                                       ---------         ---------       ---------
                                                         132,162           133,856          (1,694)        (1.3)%
  
  Gain on sale of lease receivables                       24,356             1,891          22,465       1188.0%
                                                       ---------         ---------       ---------
  
  Income before income taxes                             112,053            79,341          32,712         41.2%
  Provision for income taxes                              44,614            32,828          11,786         35.9%
                                                       ---------         ---------       ---------
  Net income                                          $   67,439        $   46,513      $   20,926         45.0%
                                                       =========         =========       =========
  </TABLE>
  <PAGE>
  
  Revenues
  
  Total revenues increased by approximately $8.6 million or 4.0% in the first nine
  months  of  fiscal  1999  compared  to the first  nine  months  of fiscal  1998.
  Approximately 37.3% or $3.2 million of this increase in revenues was a result of
  increased lease finance income due to the increase in lease receivables prior to
  the asset securitization completed in December 1998. The lease portfolio, net of
  lease receivables that were sold in asset securitization transactions, increased
  by 7.9% from June 30, 1998 to June 30, 1999.
  
  Office  equipment placed on rental by the IKON  marketplaces to customers,  with
  cancelable terms, may be purchased by the Company.  During the first nine months
  of fiscal 1999 and 1998, the Company purchased operating lease equipment of $6.0
  million and $47.8 million,  respectively.  Operating  leases  contributed  $27.8
  million in rental income  during the first nine months of fiscal 1999,  compared
  to $28.3 million in the first nine months of fiscal 1998.  Effective  October 1,
  1998,  the  Company has  limited  the  funding of rental  equipment  to the IKON
  marketplaces to select accounts.
  
  The Company earns  interest  income on the deferred tax  liabilities of the IKON
  marketplaces  associated  with  leases  funded  through  the  Company  at a rate
  consistent  with  the  Company's  weighted  average  outside  borrowing  rate of
  interest.  The  Company's  average  rate was 6.4% for the first  nine  months of
  fiscal  1999  compared  to 6.5% for the first nine  months of fiscal  1998.  The
  deferred tax base upon which these payments are calculated increased by 1.1 % to
  $262.2 million at June 30, 1999 from $259.4 million at June 30, 1998.  Primarily
  as a result  of the  increased  deferred  tax  liabilities,  interest  income on
  deferred  taxes rose by $1.4  million or 12.1% when  comparing  the nine  months
  ended June 30, 1999 to the nine months ended March 31, 1998.
  
  Other income  consists  primarily of late  payment  charges and various  billing
  fees.  The growth in other  income from fees is primarily  due to the  increased
  size of the lease portfolio upon which these fees are based. Overall, fee income
  from these sources grew by $4.5 million or 53.6%,  when comparing the first nine
  months of fiscal 1999 to the same period of fiscal 1998.
  
  Expenses
  
  Borrowings  to finance the lease  portfolio  in the form of loans from banks and
  the issuance of medium term notes and  lease-backed  notes in the public  market
  increased by 13.7% from the prior year,  with $2,160.4  million  outstanding  at
  June  30,  1999.  The  Company  paid a  weighted  average  interest  rate on all
  borrowings  of 6.4% in the first nine months of fiscal 1999 compared to 6.5% for
  the  first  nine  months of  fiscal  1998.  Primarily  the  result of  increased
  borrowings, interest expense increased $3.7 million, or 4.6%, when comparing the
  first nine  months of fiscal 1999 to the first nine  months of fiscal  1998.  At
  June 30,  1999,  the  Company's  debt to equity  ratio,  including  intercompany
  amounts due from IKON, was 5.4 to 1.
  
  Total  general and  administrative  expenses  for the nine months ended June 30,
  1999 decreased by $5.4 million or 10.1%,  compared to the nine months ended June
  30,  1998.  The general and  administrative  expense  category in the first nine
  months of fiscal 1999 includes depreciation expense on leased equipment totaling
  $23.3  million,  compared  to $23.9  million for the first nine months of fiscal
  1998.  In addition,  lease bonus  subsidy  payments  included in the general and
  administrative  expense  category  were $8.9 million in the first nine months of
  fiscal 1999  compared to $11.3  million in the first nine months of fiscal 1998.
  Excluding the effects of decreased  depreciation expense on operating leases and
  a decrease in lease bonus subsidy payments, remaining general and administrative
  expenses  decreased  by $2.4  million or 13.2%,  when  comparing  the first nine
  months of fiscal 1999 to the first nine months of fiscal 1998.
  
  
  
  <PAGE>
  
  
  Gain on Sale of Lease Receivables
  
  In December 1998, the Company 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  require that the Company will continue to
  service  the lease  portfolio.  The  Company  recognized  a pretax gain of $14.3
  million  during the first quarter of fiscal 1999 on this  agreement.  On May 25,
  1999, the Company repurchased leases sold under this agreement with the proceeds
  from the  lease-backed  notes. As a result of the  repurchase,  the $250 million
  commitment remains available.
  
  The Company has additional asset  securitization  agreements for $275 million of
  eligible direct financing receivables. These agreements expire in September 1999
  ($150  million)  and March  2000  ($125  million),  respectively.  Both of these
  agreements are expected to be renewed.  These  agreements are also structured as
  revolving securitizations,  whereby additional leases can be sold as collections
  reduce the  previously  sold  interests.  During the first nine months of fiscal
  1999,  collections reduced previously sold interests on these two agreements and
  the $250 million  transaction,  described above, by $125.1 million.  The Company
  sold an additional  $125.1 million in net eligible direct  financing  leases and
  recognized  pretax  gains of $10.1  million for the nine  months  ended June 30,
  1999.
  
  Income Before Income Taxes
  
  Income before income taxes for the first nine months of fiscal 1999 increased by
  $32.7 million or 41.2% over the first nine months of fiscal 1998.  This increase
  in  income  before  income  taxes was  essentially  the  effect of higher  asset
  securitization  gains,  higher  earnings on a larger  lease  portfolio  base and
  decreased  general  and  administrative  expenses,  partially  offset  by higher
  borrowing costs.
  
  Provision for Income Taxes
  
  Income taxes for the first nine months of fiscal 1999 increased by $11.8 million
  or 35.9% over the first nine  months of fiscal  1998.  This  increase  in income
  taxes is directly  attributable to the increase in income before income taxes in
  the first nine months of fiscal 1999,  offset by a decrease in the effective tax
  rate  compared to the first nine months of fiscal 1998.  The  effective tax rate
  was 39.8% for the first nine  months of fiscal 1999 and 41.4% for the first nine
  months of 1998.
  
                             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 and/or IKON's future financial  condition
  and results. These risks and uncertainties,  which apply to both the Company and
  IKON,  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
  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) the
               press release issued by IKON,  dated April 22, 1999,  regarding the
               appointment of William S. Urkiel as IKON's Chief Financial  Officer
               and Senior Vice President, and 2) the press release issued by IKON,
               dated April 28, 1999,  regarding IKON'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 June 30, 1999, the Company filed a Current Report on Form 8-K to
               file,  under  Item 5 of the form,  its  announcement  that  Russell
               Slack,  who had  been  serving  in an  executive  capacity  for the
               Registrant, was appointed President of the Registrant.
  
               On July 30, 1999, the Company filed a Current Report on Form 8-K to
               file,  under Item 5 of the form,  the press release issued by IKON,
               dated July 28, 1999,  regarding  IKON'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.
  
  
                                           IOS CAPITAL, INC.
  
  
  Date  August 13, 1999                    /s/ Harry G. Kozee
        ---------------                    ----------------------
                                           Harry G. Kozee
                                           Vice President - Finance
                                           (Chief Accounting Officer)
  
  
  
  <PAGE>
                                  Index to Exhibits
  
  
  
  Exhibit Number
  
          (27)               Financial Data Schedule
metadata_documents: [{"type": "10-Q", "sequence": "1", "secsgml_size_bytes": 51181}]
metadata_filer: {"company-data": {"conformed-name": "IOS CAPITAL INC", "cik": "0000922255", "assigned-sic": "5110", "irs-number": "232493042", "state-of-incorporation": "DE", "fiscal-year-end": "0930"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-20405", "film-number": "99686936"}, "business-address": {"street1": "1738 BASS RD", "city": "MACON", "state": "GA", "zip": "31210", "phone": "2154712300"}, "mail-address": {"street1": "BOX 834", "city": "VALLEY FORGE", "state": "PA", "zip": "19482"}, "former-company": [{"former-conformed-name": "IKON CAPITAL INC", "date-changed": "19980113"}, {"former-conformed-name": "ALCO CAPITAL RESOURCE INC", "date-changed": "19940425"}]}
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 0-20405
  
                                  IOS CAPITAL, INC.
               (Exact name of registrant as specified in its charter)
  
             DELAWARE                                    23-2493042
  (State or other jurisdiction of                    (I.R.S. Employer
  incorporation or organization)                      Identification No.)
  
                        1738 Bass Road, Macon, Georgia 31210
                      (Address of principal executive offices)
                                     (Zip Code)
  
                                   (912) 471-2300
                (Registrant's telephone number, including area code)
  
                (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, $.01 par value per share                            1,000 shares
  Registered Debt Outstanding as of July 31, 1999              $2,065,956,059.06
  
  The registrant,  an indirect wholly owned  subsidiary of IKON Office  Solutions,
  Inc. ("IKON"), meets the conditions set forth in General Instruction H(1)(a) and
  (b) of Form 10-Q and is,  therefore,  filing with the reduced  disclosure format
  contemplated thereby.
  INDEX
  
                                  IOS CAPITAL, INC.
  
  PART I.  FINANCIAL INFORMATION
  
        Item 1.              Financial Statements (Unaudited)
  
                             Balance Sheets--June 30, 1999 and
                             September 30, 1998
  
                             Statements of Income--Three and Nine Months ended
                             June 30, 1999 and June 30, 1998
  
                             Statements of Cash Flows--Nine Months ended
                             June 30, 1999 and June 30, 1998
  
                             Notes to Financial Statements--June 30, 1999
  
        Item 2.              Management's Discussion and Analysis of
                             Financial Condition and Results of Operations
  
  PART II.  OTHER INFORMATION
  
        Item 6.              Exhibits and Reports on Form 8-K
  
  SIGNATURES
  PART I . FINANCIAL INFORMATION
  
  Item 1: Financial Statements (unaudited)
  
                                  IOS CAPITAL, INC.
                                   BALANCE SHEETS
                 (in thousands, except share and per share amounts)
  June 30,      September 30,
                                                           1999             1998
                                                       -----------      -----------
  Assets
  
  Investment in leases:
  Direct financing leases                         $ 2,197,509      $ 2,002,012
       Less: Unearned income                              (354,017)        (343,211)
                                                       -----------      -----------
                                                         1,843,492        1,658,801
       Funded leases, net                                  530,952          592,827
                                                       -----------      -----------
                                                         2,374,444        2,251,628
  
  Cash                                                                        2,621
  Restricted cash                                           33,433
  Accounts receivable                                       80,957           63,066
  Due  from  IKON                                          159,613           52,060
  Prepaid expenses and other assets                         13,786           14,224
  Leased equipment-operating rentals at cost
       less accumulated depreciation of:
       6/99 - $53,245; 9/98 - $43,411                       53,799           76,551
  Property and equipment at cost, less
       accumulated depreciation of:
       6/99 - $6,934; 9/98 - $5,596                         10,171           11,491
                                                       -----------      -----------
  Total assets                                         $ 2,726,203      $ 2,471,641
                                                       ===========      ===========
  
  Liabilities and shareholder's equity
  
  Liabilities:
       Accounts payable and accrued expenses           $    63,230      $    59,206
       Accrued interest                                      6,753           33,467
       Notes payable to banks                                               100,000
       Medium term notes                                 1,463,850        1,849,750
       Lease-backed notes                                  696,537
       Deferred income taxes                               124,291           95,115
                                                       -----------      -----------
  Total liabilities                                      2,354,661        2,137,538
  
  Shareholder's equity:
       Common Stock - $.01 par value, 1,000 shares
           authorized, issued, and outstanding
       Contributed capital                                 119,415          149,415
       Retained earnings                                   252,127          184,688
                                                       -----------      -----------
  Total shareholder's equity                               371,542          334,103
                                                       -----------      -----------
  Total liabilities and shareholder's equity           $ 2,726,203      $ 2,471,641
                                                       ===========      ===========
  See notes to financial statements.
  IOS CAPITAL, INC.
                                STATEMENTS OF INCOME
                                   (in thousands)
  Three Months Ended                        Nine Months Ended
                                                                        June 30                                   June 30
                                                            --------------------------------         ---------------------------------
                                                                 1999               1998                  1999               1998
                                                            -------------      -------------         --------------     --------------
  Revenues:
  Lease finance income                                      $54,513            $56,904               $166,363           $163,170
       Rental income                                               8,723             10,138                 27,760             28,287
       Interest on IKON tax deferrals                              4,361              3,944                 12,836             11,449
       Other income                                                5,486              3,035                 12,900              8,400
                                                            -------------      -------------         --------------     --------------
                                                                  73,083             74,021                219,859            211,306
  
  Expenses:
       Interest                                                   28,339             27,382                 84,148             80,455
       General and administrative                                 15,470             17,658                 48,014             53,401
                                                            -------------      -------------         --------------     --------------
                                                                  43,809             45,040                132,162            133,856
  
  Gain on sale of lease receivables                                3,477                710                 24,356              1,891
                                                            -------------      -------------         --------------     --------------
  
  Income before income taxes                                      32,751             29,691                112,053             79,341
  
  Provision for income taxes                                      11,307             12,471                 44,614             32,828
                                                            -------------      -------------         --------------     --------------
  
  Net income                                                     $21,444            $17,220                $67,439            $46,513
                                                            =============      =============         ==============     ==============
  See notes to financial statements.
  IOS CAPITAL, INC.
                              STATEMENTS OF CASH FLOWS
                                   (in thousands)
  Nine Months Ended
                                                                                                  June 30,
                                                                                 -------------------------------------------
                                                                                         1999                    1998
                                                                                 -------------------      ------------------
  Operating activities:
  Net income                                                                                $67,439                 $46,513
  Adjustments to reconcile net income to net
        cash provided by operating activities:
             Depreciation and amortization                                                   25,401                  25,239
             Provision for deferred taxes                                                    29,176                  36,706
             Gain on sale of leases receivables                                             (24,356)                 (1,891)
             Changes in operating assets and liabilities:
                 Accounts receivable                                                        (17,891)                 (2,764)
                 Prepaid expenses and other assets                                           17,436                   2,528
                 Accounts payable and accrued expenses                                        2,301                  (4,967)
                 Accrued interest                                                           (26,714)                (21,431)
                                                                                 -------------------      ------------------
                                        Net cash provided                                    72,792                  79,933
                                                                                 -------------------      ------------------
  
  Investing activities:
  Purchases of leased equipment, net                                                           (529)                (43,917)
  Purchases of property and equipment, net                                                      (18)                 (1,009)
  Investment in Leases
        Additions                                                                        (1,128,360)             (1,287,825)
        Cancellations                                                                       257,133                 259,893
        Collections                                                                         633,879                 588,237
        Proceeds from sale                                                                  375,142                  78,836
        Repurchase of leases sold                                                          (250,000)                      0
                                                                                 -------------------      ------------------
                                        Net cash used                                      (112,753)               (405,785)
                                                                                 -------------------      ------------------
  
  Financing activities:
  Proceeds from bank borrowings                                                                   0                 200,000
  Payments on bank borrowings                                                              (100,000)                      0
  Proceeds from issuance of medium term notes                                                     0                 348,500
  Payments on medium term notes                                                            (385,900)               (216,000)
  Proceeds from issuance of lease-backed notes                                              749,331                       0
  Payments on lease-backed notes                                                            (55,105)                      0
  Deposit to restricted cash                                                                (33,433)                      0
  Capital contributed by IKON                                                                     0                   5,000
  Dividend to IKON                                                                          (30,000)                      0
                                                                                 -------------------      ------------------
                                        Net cash provided                                   144,893                 337,500
                                                                                 -------------------      ------------------
  
  Increase in cash and amounts due from IKON                                                104,932                  11,648
  Cash and Due from IKON at beginning of year                                                54,681                   4,463
                                                                                 -------------------      ------------------
  Due from IKON at end of period                                                           $159,613                 $16,111
                                                                                 ===================      ==================
  See notes to financial statements.
  IOS Capital, Inc.
                            Notes to Financial Statements
                                    June 30, 1999
  
  Note 1:    Basis of Presentation
  
             The accompanying  unaudited condensed 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 financial statements and
  footnotes  thereto  included in the  Company's  report on Form 10-K for the year
  ended September 30, 1998.  Certain prior year amounts have been  reclassified to
  conform with the current year presentation.
  
  Note 2:    Medium Term Note Program
  
             During the nine months ended June 30, 1999,  IOS Capital,  Inc.  (the
  "Company")  issued no medium term notes under its $3.5 billion  medium term note
  program.  At  June  30,  1999,  $1,463.9  million  of  medium  term  notes  were
  outstanding  with a weighted average interest rate of 6.5%. The remaining amount
  available under this program is $1,123.3 million.
  
  Note 3: Asset Securitization
  
           In December  1998,  the Company  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 this new pool of leases,  additional  leases can be
  sold up to $250  million.  The terms of the  agreement  require that the Company
  continue to service the lease portfolio. The Company recognized a pretax gain of
  $14.3 million during the first quarter of fiscal 1999 on this agreement.  On May
  25, 1999, the Company  repurchased the leases sold in this  transaction with the
  proceeds from the lease-backed notes described below.
  
           The Company has  additional  asset  securitization  agreements for $275
  million of eligible direct financing receivables that expire in March 2000 ($125
  million)  and  September  1999  ($150  million).  Both of these  agreements  are
  expected  to  be  renewed.   These   agreements   are  structured  as  revolving
  securitizations, whereby additional leases can be sold as collections reduce the
  previously  sold  interests.  During  the first  nine  months  of  fiscal  1999,
  collections  reduced  previously  sold interests on these two agreements and the
  $250 million  transaction,  described above, by $125.1 million. The Company sold
  an  additional  $125.1  million  in net  eligible  direct  financing  leases and
  recognized  pretax  gains of $10.1  million for the nine  months  ended June 30,
  1999.
  IOS Capital, Inc.
                        Notes to Financial Statements (Cont.)
                                    June 30, 1999
  
  Note 4: Lease-backed Notes
  
           On May 19, 1999,  IKON  Receivables,  LLC (an affiliate of the Company)
  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 is the sole  member,  and IKON  Receivables,  LLC, of which
  IKON  Receivables-1,  LLC is the sole member.  The Company  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 received approximately $749 million in net proceeds from the sale of
  the Notes and used $250  million of that amount to  repurchase  previously  sold
  assets in  connection  with the asset  securitization  transaction  completed in
  December  1998.  The  repurchased  assets 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 5:  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 mark to market adjustments on the retained
  interest on lease receivables to be included in other comprehensive income.
  
           Total comprehensive income is as follows (in thousands):
  Three Months Ended           Nine Months Ended
                                                                             June  30                      June 30
                                                                             --------                      -------
                                                                         1999           1998           1999        1998
                                                                         ----           ----           ----        ----
  Net income                                                  $21,444         $17,220       $67,439     $46,513
           Mark to market adjustment, net of tax                       (1,128)                             0
                                                                       -------         -------       -------     -------
           Total comprehensive income                                  $20,316         $17,220       $67,439     $46,513
                                                                       =======       =========    ==========     =======
  Item 2: Management's Discussion and Analysis of Financial Condition and
  Results of Operations
  
  Pursuant to General  Instruction H(2)(a) of Form 10-Q, the following analysis of
  the results of operations is presented in lieu of  Management's  Discussion  and
  Analysis of Financial Condition and Results of Operations.
  
  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.
  
  IKON has appointed a Year 2000 Corporate  Compliance  Team, which has prepared a
  compliance  program  for all  business  units,  including  the  Company,  and is
  responsible  for  coordination  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.  IKON'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 of
  critical  systems 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.
  
  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 $1.4 million and is being funded
  through operating cash flows, all of which will be expensed as incurred. Through
  June 30, 1999, the Company has expensed approximately $833,000 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,  IKON,  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 revenues due to failure to meet customer quality expectations.
  o    Increased  operational costs due to manual  processing,  data corruption or
       disaster recovery.
  o    Inability to bill or invoice.
  
  The cost of the project  and the date on which IKON and the  Company  believe it
  will  complete  the Year  2000  modifications  are  based in  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. IKON'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. The Company and IKON expect to have
  contingency  plans in place by October 31, 1999. In addition,  IKON 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.
  
                     Three Months Ended June 30, 1999 Compared
                      with the Three Months Ended June 30, 1998
  
  Comparative summarized results of operations for the three months ended June 30,
  1999 and 1998 are set  forth in the  table  below.  This  table  also  shows the
  increase or decrease in the dollar  amounts of major  revenue and expense  items
  between periods, as well as the related percentage increase or decrease.
  Three Months
  (dollars in thousands)                                      Ended June 30               Increase (Decrease)
                                                          1999              1998           Amount        Percent
                                                          ----              ----           ------        -------
  Revenues:
  Lease finance income                              $54,513           $56,904       $  (2,391)        (4.2)%
       Rental income                                       8,723            10,138          (1,415)       (14.0)%
       Interest on IKON tax deferrals                      4,361             3,944             417         10.6%
       Other income                                        5,486             3,035           2,451         80.8%
                                                       ---------         ---------       ---------
                                                          73,083            74,021            (938)        (1.3)%
  
  Expenses:
       Interest                                           28,339            27,382             957          3.5%
       General and administrative                         15,470            17,658          (2,188)       (12.4)%
                                                       ---------         ---------       ---------
                                                          43,809            45,040          (1,231)        (2.7)%
  
  Gain on sale of lease receivables                        3,477               710           2,767        389.7%
                                                       ---------         ---------       ---------
  
  Income before income taxes                              32,751            29,691           3,060         10.3%
  Provision for income taxes                              11,307            12,471          (1,164)        (9.3)%
                                                       ---------            ------       ---------
  Net income                                          $   21,444        $   17,220      $    4,224         24.5%
                                                       =========         =========       =========
  Revenues
  
  Total revenues decreased by approximately  $938,000 or 1.3% in the third quarter
  of fiscal  1999  compared to the third  quarter of fiscal  1998.  Lease  finance
  income decreased by approximately  $2.4 million due to the effect of the sale of
  $366.6  million  in direct  financing  leases in  December  1998  under an asset
  securitization  transaction.  The lease portfolio, net of lease receivables sold
  in asset securitization  transactions,  increased by 7.9 % from June 30, 1998 to
  June 30, 1999.
  
  Office  equipment placed on rental by the IKON  marketplaces to customers,  with
  cancelable  terms, may be purchased by the Company.  During the third quarter of
  fiscal 1999, the Company  purchased  operating  lease  equipment of $.3 million,
  compared to $17.1 million in the third quarter of fiscal 1998.  Operating leases
  contributed  $8.7 million in rental  income  during the third  quarter of fiscal
  1999,  compared to $10.1 million in the third quarter of fiscal 1998.  Effective
  October 1, 1998, the Company has limited the funding of rental  equipment to the
  IKON marketplaces to select accounts.
  
  The Company earns  interest  income on the deferred tax  liabilities of the IKON
  marketplaces  associated  with  leases  funded  through  the  Company  at a rate
  consistent  with  the  Company's  weighted  average  outside  borrowing  rate of
  interest.  The  Company's  average rate was 6.4% for the third quarter of fiscal
  1999  compared to 6.5% for the third  quarter of fiscal  1998.  The deferred tax
  base upon  which  these  payments  are  calculated  increased  by 1.1% to $262.2
  million at June 30, 1999 from $259.4  million at June 30,  1998.  Primarily as a
  result of the increased  deferred tax  liabilities,  interest income on deferred
  taxes rose by $418,000 or 10.6% when  comparing  the three months ended June 30,
  1999 to the three months ended June 30, 1998.
  
  Other income  consists  primarily of late  payment  charges and various  billing
  fees.  The growth in other  income from fees is primarily  due to the  increased
  size of the lease portfolio, including securitized leases, upon which these fees
  are based. Overall, fee income from these sources grew by $2.5 million or 80.8%,
  when  comparing  the third  quarter of fiscal  1999 to the same period of fiscal
  1998.
  
  Expenses
  
  Borrowings  to finance the lease  portfolio  in the form of loans from banks and
  the issuance of medium term notes and  lease-backed  notes in the public  market
  increased by 13.7% from the prior year,  with $2,160.4  million  outstanding  at
  June  30,  1999.  The  Company  paid a  weighted  average  interest  rate on all
  borrowings  of 6.4% in the third quarter of fiscal 1999 compared to 6.5% for the
  third  quarter of fiscal 1998. As a result of the  lease-backed  notes issued in
  May 1999,  interest expense  increased by $957,000,  or 3.5%, when comparing the
  third  quarter of fiscal 1999 to the third  quarter of fiscal 1998.  At June 30,
  1999, the Company's  debt to equity ratio,  including  intercompany  amounts due
  from IKON, was 5.4 to 1.
  
  Total  general and  administrative  expenses for the quarter ended June 30, 1999
  decreased by $2.2 million or 12.4%, compared to the quarter ended June 30, 1998.
  The general and  administrative  expense category in the third quarter of fiscal
  1999 includes  depreciation  expense on leased equipment  totaling $7.3 million,
  compared to $8.5  million for the third  quarter of fiscal  1998.  In  addition,
  lease bonus subsidy payments included in the general and administrative  expense
  category  were $3.1 million in the third quarter of fiscal 1999 compared to $3.7
  million  in  the  third  quarter  of  fiscal  1998.  Excluding  the  effects  of
  depreciation  expense on operating  leases and a decrease in lease bonus subsidy
  payments, remaining general and administrative expenses decreased by $318,000 or
  5.8%,  when  comparing  the third quarter of fiscal 1999 to the third quarter of
  fiscal 1998.
  Gain on Sale of Lease Receivables
  
  The Company has asset  securitization  agreements  for $525  million of eligible
  direct financing  receivables.  These agreements  expire in September 1999 ($150
  million),   March  2000  ($125  million)  and  November  2001  ($250   million),
  respectively.  The March and  September  agreements  totaling  $275  million are
  expected  to  be  renewed.   The   agreements   are   structured   as  revolving
  securitizations, whereby additional leases can be sold as collections reduce the
  previously sold interests.  During the third quarter of fiscal 1999, collections
  reduced  previously  sold  interests on all  securitization  agreements by $42.1
  million.  The Company sold an additional  $42.1  million in net eligible  direct
  financing leases and recognized  pretax gains of $3.5 million.  On May 25, 1999,
  $250 million of assets  securitized  under the agreement  expiring November 2001
  were repurchased by the Company with the proceeds of the lease-backed  notes. As
  a result of the repurchase, the $250 million commitment remains available.
  
  Income Before Income Taxes
  
  Income  before  income taxes for the third  quarter of fiscal 1999  increased by
  $3.1 million or 10.3% over the third  quarter of fiscal 1998.  This  increase in
  income  before  income taxes was  essentially  the effect of the increase in the
  gains on the sale of lease receivables and decreased general and  administrative
  expenses, offset by additional interest expense and a reduction in revenue.
  
  Provision for Income Taxes
  
  Income taxes for the third  quarter of fiscal 1999  decreased by $1.2 million or
  9.3% over the third  quarter of fiscal  1998.  This  decrease in income taxes is
  primarily a result of a decrease in the  effective tax rate in the third quarter
  of fiscal 1999 compared to the third  quarter of fiscal 1998.  The effective tax
  rate was  34.5%  for the  third  quarter  of  fiscal  1999 and 42% for the third
  quarter of 1998.
  
                      Nine Months Ended June 30, 1999 Compared
                      with the Nine Months Ended June 30, 1998
  
  Comparative  summarized results of operations for the nine months ended June 30,
  1999 and 1998 are set  forth in the  table  below.  This  table  also  shows the
  increase or decrease in the dollar  amounts of major  revenue and expense  items
  between periods, as well as the related percentage increase or decrease.
  Nine Months
  (dollars in thousands)                                      Ended June 30               Increase (Decrease)
                                                          1999              1998           Amount        Percent
                                                          ----              ----           ------        -------
  Revenues:
  Lease finance income                             $166,363          $163,170          $3,193          2.0%
       Rental income                                      27,760            28,287            (527)        (1.9)%
       Interest on IKON tax deferrals                     12,836            11,449           1,387         12.1%
       Other income                                       12,900             8,400           4,500         53.6%
                                                       ---------         ---------       ---------
                                                         219,859           211,306           8,553          4.0%
  
  Expenses:
       Interest                                           84,148            80,455           3,693          4.6%
       General and administrative                         48,014            53,401          (5,387)       (10.1)%
                                                       ---------         ---------       ---------
                                                         132,162           133,856          (1,694)        (1.3)%
  
  Gain on sale of lease receivables                       24,356             1,891          22,465       1188.0%
                                                       ---------         ---------       ---------
  
  Income before income taxes                             112,053            79,341          32,712         41.2%
  Provision for income taxes                              44,614            32,828          11,786         35.9%
                                                       ---------         ---------       ---------
  Net income                                          $   67,439        $   46,513      $   20,926         45.0%
                                                       =========         =========       =========
  Revenues
  
  Total revenues increased by approximately $8.6 million or 4.0% in the first nine
  months  of  fiscal  1999  compared  to the first  nine  months  of fiscal  1998.
  Approximately 37.3% or $3.2 million of this increase in revenues was a result of
  increased lease finance income due to the increase in lease receivables prior to
  the asset securitization completed in December 1998. The lease portfolio, net of
  lease receivables that were sold in asset securitization transactions, increased
  by 7.9% from June 30, 1998 to June 30, 1999.
  
  Office  equipment placed on rental by the IKON  marketplaces to customers,  with
  cancelable terms, may be purchased by the Company.  During the first nine months
  of fiscal 1999 and 1998, the Company purchased operating lease equipment of $6.0
  million and $47.8 million,  respectively.  Operating  leases  contributed  $27.8
  million in rental income  during the first nine months of fiscal 1999,  compared
  to $28.3 million in the first nine months of fiscal 1998.  Effective  October 1,
  1998,  the  Company has  limited  the  funding of rental  equipment  to the IKON
  marketplaces to select accounts.
  
  The Company earns  interest  income on the deferred tax  liabilities of the IKON
  marketplaces  associated  with  leases  funded  through  the  Company  at a rate
  consistent  with  the  Company's  weighted  average  outside  borrowing  rate of
  interest.  The  Company's  average  rate was 6.4% for the first  nine  months of
  fiscal  1999  compared  to 6.5% for the first nine  months of fiscal  1998.  The
  deferred tax base upon which these payments are calculated increased by 1.1 % to
  $262.2 million at June 30, 1999 from $259.4 million at June 30, 1998.  Primarily
  as a result  of the  increased  deferred  tax  liabilities,  interest  income on
  deferred  taxes rose by $1.4  million or 12.1% when  comparing  the nine  months
  ended June 30, 1999 to the nine months ended March 31, 1998.
  
  Other income  consists  primarily of late  payment  charges and various  billing
  fees.  The growth in other  income from fees is primarily  due to the  increased
  size of the lease portfolio upon which these fees are based. Overall, fee income
  from these sources grew by $4.5 million or 53.6%,  when comparing the first nine
  months of fiscal 1999 to the same period of fiscal 1998.
  
  Expenses
  
  Borrowings  to finance the lease  portfolio  in the form of loans from banks and
  the issuance of medium term notes and  lease-backed  notes in the public  market
  increased by 13.7% from the prior year,  with $2,160.4  million  outstanding  at
  June  30,  1999.  The  Company  paid a  weighted  average  interest  rate on all
  borrowings  of 6.4% in the first nine months of fiscal 1999 compared to 6.5% for
  the  first  nine  months of  fiscal  1998.  Primarily  the  result of  increased
  borrowings, interest expense increased $3.7 million, or 4.6%, when comparing the
  first nine  months of fiscal 1999 to the first nine  months of fiscal  1998.  At
  June 30,  1999,  the  Company's  debt to equity  ratio,  including  intercompany
  amounts due from IKON, was 5.4 to 1.
  
  Total  general and  administrative  expenses  for the nine months ended June 30,
  1999 decreased by $5.4 million or 10.1%,  compared to the nine months ended June
  30,  1998.  The general and  administrative  expense  category in the first nine
  months of fiscal 1999 includes depreciation expense on leased equipment totaling
  $23.3  million,  compared  to $23.9  million for the first nine months of fiscal
  1998.  In addition,  lease bonus  subsidy  payments  included in the general and
  administrative  expense  category  were $8.9 million in the first nine months of
  fiscal 1999  compared to $11.3  million in the first nine months of fiscal 1998.
  Excluding the effects of decreased  depreciation expense on operating leases and
  a decrease in lease bonus subsidy payments, remaining general and administrative
  expenses  decreased  by $2.4  million or 13.2%,  when  comparing  the first nine
  months of fiscal 1999 to the first nine months of fiscal 1998.
  Gain on Sale of Lease Receivables
  
  In December 1998, the Company 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  require that the Company will continue to
  service  the lease  portfolio.  The  Company  recognized  a pretax gain of $14.3
  million  during the first quarter of fiscal 1999 on this  agreement.  On May 25,
  1999, the Company repurchased leases sold under this agreement with the proceeds
  from the  lease-backed  notes. As a result of the  repurchase,  the $250 million
  commitment remains available.
  
  The Company has additional asset  securitization  agreements for $275 million of
  eligible direct financing receivables. These agreements expire in September 1999
  ($150  million)  and March  2000  ($125  million),  respectively.  Both of these
  agreements are expected to be renewed.  These  agreements are also structured as
  revolving securitizations,  whereby additional leases can be sold as collections
  reduce the  previously  sold  interests.  During the first nine months of fiscal
  1999,  collections reduced previously sold interests on these two agreements and
  the $250 million  transaction,  described above, by $125.1 million.  The Company
  sold an additional  $125.1 million in net eligible direct  financing  leases and
  recognized  pretax  gains of $10.1  million for the nine  months  ended June 30,
  1999.
  
  Income Before Income Taxes
  
  Income before income taxes for the first nine months of fiscal 1999 increased by
  $32.7 million or 41.2% over the first nine months of fiscal 1998.  This increase
  in  income  before  income  taxes was  essentially  the  effect of higher  asset
  securitization  gains,  higher  earnings on a larger  lease  portfolio  base and
  decreased  general  and  administrative  expenses,  partially  offset  by higher
  borrowing costs.
  
  Provision for Income Taxes
  
  Income taxes for the first nine months of fiscal 1999 increased by $11.8 million
  or 35.9% over the first nine  months of fiscal  1998.  This  increase  in income
  taxes is directly  attributable to the increase in income before income taxes in
  the first nine months of fiscal 1999,  offset by a decrease in the effective tax
  rate  compared to the first nine months of fiscal 1998.  The  effective tax rate
  was 39.8% for the first nine  months of fiscal 1999 and 41.4% for the first nine
  months of 1998.
  
                             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 and/or IKON's future financial  condition
  and results. These risks and uncertainties,  which apply to both the Company and
  IKON,  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
  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) the
               press release issued by IKON,  dated April 22, 1999,  regarding the
               appointment of William S. Urkiel as IKON's Chief Financial  Officer
               and Senior Vice President, and 2) the press release issued by IKON,
               dated April 28, 1999,  regarding IKON'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 June 30, 1999, the Company filed a Current Report on Form 8-K to
               file,  under  Item 5 of the form,  its  announcement  that  Russell
               Slack,  who had  been  serving  in an  executive  capacity  for the
               Registrant, was appointed President of the Registrant.
  
               On July 30, 1999, the Company filed a Current Report on Form 8-K to
               file,  under Item 5 of the form,  the press release issued by IKON,
               dated July 28, 1999,  regarding  IKON'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.
  
                                           IOS CAPITAL, INC.
  
  Date  August 13, 1999                    /s/ Harry G. Kozee
        ---------------                    ----------------------
                                           Harry G. Kozee
                                           Vice President - Finance
                                           (Chief Accounting Officer)
  Index to Exhibits
  
  Exhibit Number
  
          (27)               Financial Data Schedule