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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
COMMISSION FILE NUMBER 1-5964
ALCO STANDARD CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO 23-0334400
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
BOX 834, VALLEY FORGE, PENNSYLVANIA 19482
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
Registrant's telephone number, including area code: (215) 296-8000
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH
EXCHANGE ON WHICH
TITLE OF CLASS REGISTERED
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Common Stock, no par value New York Stock Exchange
Preferred Share Purchase Rights Philadelphia Stock
Exchange
Series AA Convertible
Preferred Stock (Depositary Shares) Chicago Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
THE REGISTRANT HEREBY AMENDS ITS QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL
QUARTER ENDED DECEMBER 31, 1993 IN THE MANNER SET FORTH HEREIN.
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Page 2 of 15
INDEX
ALCO STANDARD CORPORATION
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--December 31, 1993
and September 30, 1993
Consolidated Statements of Income--Three months
ended December 31, 1993 and December 31, 1992
Consolidated Statements of Cash Flows--Three
months ended December 31, 1993 and
December 31, 1992
Notes to Consolidated Financial Statements--
December 31, 1993
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition and Liquidity
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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Page 3 of 15
PART I. FINANCIAL INFORMATION
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Item 1: Financial Statements
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ALCO STANDARD CORPORATION
CONSOLIDATED BALANCE SHEETS
( in thousands )
December 31 September 30
ASSETS 1993 1993
- - ------ ----------- ------------
Current Assets
Cash $ 31,284 $ 36,495
Accounts receivable less allowance for doubtful
accounts:
12/93 - $30,255; 9/93 - $27,528 817,872 855,666
Inventories 660,642 591,964
Prepaid expenses, deposits and deferred taxes 106,242 92,600
--------- ---------
Total current assets 1,616,040 1,576,725
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Investment in Unconsolidated Affiliate 117,398 118,060
Other Investments and Long-Term Receivables 46,736 46,813
Property and Equipment, at cost 610,550 596,901
Less accumulated depreciation 271,104 260,551
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339,446 336,350
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Other Assets
Excess of cost of acquired companies over equity 702,580 694,757
Miscellaneous 72,389 69,662
Deferred taxes 24,447 22,454
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799,416 786,873
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Finance Subsidiaries Assets 518,387 484,069
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$3,437,423 $3,348,890
========= =========
See notes to consolidated financial statements.
Page 4 of 15
ALCO STANDARD CORPORATION
CONSOLIDATED BALANCE SHEETS
( in thousands )
December 31 September 30
LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1993
- - ------------------------------------ ----------- ------------
Current Liabilities
Current portion of long-term debt $ 38,979 $ 39,915
Notes payable 247,799 164,249
Trade accounts payable 382,773 426,971
Accrued salaries, wages and commissions 61,406 80,097
Deferred revenues 115,688 116,631
Other accrued expenses 206,894 192,311
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Total current liabilities 1,053,539 1,020,174
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Long-Term Debt 289,399 590,154
Other Liabilities
Restructuring costs 128,097 142,459
Workers' compensation and other 121,010 113,069
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249,107 255,528
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Finance Subsidiaries Liabilities;
including debt of: 12/93 - $446,507; 9/93 -
$413,092 472,200 437,418
Redeemable Preferred Stock of Subsidiary 25,000 25,000
Shareholders' Equity
Series AA convertible preferred stock, no par value,
4,025 depositary shares issued and outstanding 198,403 197,900
Common stock, no par value: authorized 75,000 shares;
Issued 12/93 - 54,522 shares; 9/93 - 48,772 shares 552,786 259,031
Retained earnings 671,138 651,373
Foreign currency translation adjustment (21,653) (23,640)
Cost of common shares in treasury: 12/93 -
1,456 shares; 9/93 - 1,808 shares (52,496) (64,048)
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1,348,178 1,020,616
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$ 3,437,423 $ 3,348,890
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See notes to consolidated financial statements.
Page 5 of 15
ALCO STANDARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
Three Months Ended
December 31
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1993 1992
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Revenues
Net sales $ 1,905,989 $ 1,431,905
Dividends, interest and other income 950 994
Finance subsidiaries 14,841 11,557
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1,921,780 1,444,456
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Costs and Expenses
Cost of goods sold 1,430,134 1,074,560
Selling and administrative 419,097 311,967
Interest 12,143 11,794
Finance subsidiaries interest 6,292 5,735
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1,867,666 1,404,056
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Income (Loss) From Unconsolidated Affiliate (736) 519
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Income from Continuing Operations, Before Taxes 53,378 40,919
Taxes on Income 21,524 16,160
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Income from Continuing Operations 31,854 24,759
Income from Discontinued Operations, net of income
taxes 1,188
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Income before cumulative effect of
changes in accounting principles 31,854 25,947
Cumulative effect of
Postretirement benefits other than pensions (net of
income taxes) (1,421)
Income taxes 1,421
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Net Income 31,854 25,947
Preferred Dividends 2,893 285
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Net Income Available to Common Shareholders $ 28,961 $ 25,662
========== ==========
Earnings Per Share (1)
Continuing operations $0.60 $0.52
Discontinued operations 0.03
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Before cumulative effect of changes
in accounting principles 0.60 0.55
Cumulative effect of
Postretirement benefits other than pensions (net of
income taxes) (0.03)
Income taxes 0.03
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$0.60 $0.55
========== ==========
Cash dividends per share of common stock $0.25 $0.24
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(1) See Exhibit 11 for computations of earnings per share.
See notes to consolidated financial statements.
Page 6 of 15
ALCO STANDARD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
December 31,
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1993 1992
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Operating activities
Net income $ 31,854 $ 25,947
Additions (deductions) to reconcile net income to
net cash used by operating activities:
Depreciation 16,269 13,432
Amortization 6,353 5,677
Provision for losses on accounts receivable 5,606 3,878
Benefit for deferred income taxes (303) (39)
Change in deferred liabilities 6,911 (2,479)
Changes in operating assets and liabilities, net
of effects from acquisitions and divestitures:
Decrease in accounts receivable 32,466 26,190
Increase in inventories (66,507) (29,449)
Increase in prepaid expenses (13,640) (28,856)
Decrease in accounts payable, deferred
revenues and accrued expenses (64,308) (69,431)
Miscellaneous (4,073) (8,767)
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Net cash used (49,372) (63,897)
Investing activities
Proceeds from sale of property and equipment 5,058 1,624
Payments received on long-term receivables 1,626 3,218
Cost of companies acquired, net of cash acquired (9,160) (136,777)
Expenditures for property and equipment (22,499) (18,176)
Purchase of miscellaneous assets (2,847) (3,817)
Finance subsidiaries receivables - additions (82,247) (61,360)
Finance subsidiaries receivables - collections 46,839 37,853
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Net cash used (63,230) (177,435)
Financing activities
Proceeds from issuance of long-term debt 6,818 117,241
Proceeds from option exercises and sale of treasury
shares 18,975 20,119
Proceeds from issuance of common stock, net 293,755
Proceeds from issuance of preferred stock, net 196,722
Proceeds from short-term borrowings, net 84,179 87,000
Long-term debt repayments (310,742) (189,297)
Finance subsidiaries debt - issuance 36,723 42,655
Finance subsidiaries debt - repayments (3,308) (22,000)
Dividends paid (14,193) (11,082)
Purchase of treasury shares (4,816) (3,396)
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Net cash provided 107,391 237,962
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Net decrease in cash (5,211) (3,370)
Cash at beginning of year 36,495 24,386
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Cash at end of period $ 31,284 $ 21,016
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See notes to consolidated financial statements.
Page 7 of 15
ALCO STANDARD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
Note 1: Accounting Changes
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Effective October 1, 1993, the Company adopted SFAS No.106, "Employer's
Accounting for Post Retirement Benefits other than Pensions", and SFAS No.109,
"Accounting for Income Taxes". In adopting SFAS No.106, the Company has elected
to immediately recognize the transition obligation, which resulted in a
cumulative effect charge of $1,421,000, net of taxes, or $.03 per share. The
new standard for income taxes permitted the Company to recognize the benefit of
certain deferred tax assets that was prohibited under the previous standard,
SFAS No.96, which the Company adopted for the fiscal year ended September 30,
1988. The cumulative effect of establishing the net deferred tax asset as of
October 1, 1993 was to increase net income by $1,421,000, or $.03 per share.
Note 2: Common Stock
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In December, 1993, the Company issued 5,750,000 shares of common stock in a
public offering. The net proceeds from the offering of approximately $294
million were used for repayment of debt. Net income from continuing operations
and earnings per share from continuing operations for the fiscal year ended
September 30, 1993 would have been $13,293,000 and $.07, respectively, if the
offering had occurred on October 1, 1992. Net income and earnings per share for
the quarter ended December 31, 1993 would have been $33,219,000 and $.56,
respectively, if the offering had occurred on October 1, 1993.
Note 3: Debt
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On December 13, 1993, the Company amended its $200,000,000 credit agreement
dated December 18, 1991 to extend the term of the 364 day portion of the
facility to December 14, 1994 and the three year portion to December 18, 1996.
On January 14, 1994, the Company amended its
DM 180,000,000 credit agreement dated October 15, 1992 to extend the expiration
date of the commitment to January 11, 1995.
Page 8 of 15
ALCO STANDARD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993
Note 4: Supplemental Information to Statements of Cash Flows:
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The Company has presented statements of cash flows for the periods ended
December 31, 1993 and 1992 in accordance with SFAS No.95.
Interest paid for the quarter ended December 31, 1993 was $22,057,000.
Interest paid for the quarter ended December 31, 1992 approximates the amount
disclosed in the accompanying statement of income.
Federal income tax payments of $3,500,000 and $8,000,000 were made during
the three months ended December 31, 1993 and 1992, respectively.
The total assets for acquisitions amounted to $15,527,000 during the three
months ended December 31, 1993 and $144,432,000 during the three months ended
December 31, 1992. The excess of cost over acquired equity included in these
assets was $8,050,000 and $11,245,000, respectively.
Page 9 of 15
Item 2: Management's Discussion and Analysis of Results of Operations
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and Financial Condition and Liquidity
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Results of Operations
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The discussion of the results of operations reviews the continuing
operations of the Company as contained in the consolidated statements of income.
Three Months Ended December 31, 1993
Compared with Three Months Ended December 31, 1992
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Revenues and income before taxes for the first quarter of fiscal 1994
versus the first quarter of fiscal 1993 were as follows:
Revenues Income Before Taxes
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December 31 % December 31 %
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1993 1992 Change 1993 1992 Change
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(in millions)
Alco Office Products $ 498 $ 348 43.1% $42.5 $28.5 49.1%
Unisource
United States 1,266 925 36.9 28.9 28.2 2.5
Canada 160 173 (7.5) 2.2 4.3 (48.8)
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Total Unisource 1,426 1,098 29.9 31.1 32.5 (4.3)
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Operating 1,924 1,446 33.1 73.6 61.0 20.7
Unconsolidated affiliate (.7) .5
Interest (12.1) (11.8)
Eliminations and
non-Allocated (2) (1) (7.4) (8.8)
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$1,922 $1,445 33.0% $53.4 $40.9 30.6%
====== ====== ===== =====
Alco Office Products contributed $150 million of additional revenues, of
which $106 million related to current and prior year acquisitions. The
remaining $44 million increase reflects continued internal growth in all revenue
areas of Alco Office Product's (AOP) base companies, in particular, its
equipment, service and supply businesses. The $341 million increase in revenues
from Unisource's U.S. operations includes $263 million from prior year
acquisitions and $78 million of internal growth from its base companies. The $13
million revenue decrease in the Unisource Canadian paper businesses is primarily
attributable to a 5% decrease in the foreign exchange rate.
AOP's operating income increase of $14 million includes $6.3 million from
current and prior year acquisitions. The remaining $7.7 million of internal
growth from its base companies is primarily the result of higher operating
contributions from the service and supply areas of AOP's businesses, along with
increased operating income as related to its leasing activities. Operating
income from Unisource's U.S. paper operations increased $700,000, which
includes $6.7 million from prior year acquisitions.
Page 10 of 15
The decrease in operating income for U.S. paper operations, excluding
acquisitions, of $6 million reflects the gross margin erosion that has been
experienced in the paper industry. The decrease of $2.1 million in the Canadian
paper distribution business is the result of the carryover of certain
incremental merger costs related to the Canadian merger plan implemented in
fiscal 1993, gross margin erosion within the Canadian paper industry and the
effects of foreign exchange rates.
Geographically, revenues from the Company's paper and office products
operations outside the U.S. was $204 million for the first quarter of fiscal
1994 compared to $193 million for the same period of the prior fiscal year. The
increase is primarily due to internal growth along with contributions from prior
year AOP acquisitions, offset by decreased revenues from the Canadian paper
distribution business.
Income from foreign operations was $5.6 million for the three months ended
December 31, 1993, down $1.6 million from the prior year because of a decrease
in the operating income of the Canadian paper distribution business.
In the first quarter of fiscal 1994, the Company incurred a $700,000 loss
from its investment in an unconsolidated affiliate, IMM Office Systems Gmbh.,
compared to a $500,000 equity pickup for the comparative period in the prior
fiscal year. This reflects the current weakness in the European economy.
Interest expense increased by $300,000 as a result of higher average
borrowing levels to fund acquisitions and working capital requirements. The
increase in income before taxes of 30.6% or $12.5 million is a combined result
of improved operations from base companies along with the earnings contributed
by acquisitions. The effective income tax rate is currently 40.3% compared with
39.5% in fiscal 1993. Weighted average shares were 1.9 million shares greater
than the 46.7 million shares at December 31, 1992. This includes the impact of a
public offering of common stock in December, 1993.
The Unisource restructuring plan announced in September, 1993 is proceeding
as planned, with twenty-eight mergers expected to be completed by the end of the
second quarter. Unisource signed a 10 year $300 million agreement with
Integrated Systems Solutions Corporation, a subsidiary of IBM, effective January
1, 1994, to provide the information technology system to be implemented as part
of the restructuring plan.
During the first quarter of fiscal 1994, the Company adopted Financial
Accounting Standard No. 106, "Employer's Accounting for Retirement Benefits
other than Pensions" and Financial Accounting Standard No. 109, "Accounting for
Income Taxes"; the combined effect on earnings of these accounting changes was
neutral.
Page 11 of 15
DECEMBER 31, 1993 FORM 10Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION AND LIQUIDITY
FINANCIAL CONDITION AND LIQUIDITY
In December 1993, the Company issued 5,750,000 shares of common stock in a
public offering, and the net proceeds of approximately $294 million were used
to reduce outstanding debt. This resulted in a decrease of the Company's total
debt (excluding finance subsidiaries) to $576 million at December 31, 1993 from
$794 million at September 30, 1993. The Company's changes in cash from
operating activities included the following for the first quarter of fiscal
1994: $23 million for special purchases of inventory by some AOP companies due
to expected price increases; $12 million for Company bonus payments; and $71
million for the reduction of Accounts Payable for the Unisource businesses. For
the first quarter of fiscal 1993, such amounts were $40 million, $12 million
and $88 million, respectively. At December 31, 1993 debt as a percentage of
capitalization was 29.6%, and the current ratio was 1.5 to 1. Finance
subsidiaries debt grew by $33 million from September 30, 1993, as a result of
increased leasing activity.
The Company had a total of $603 million in bank credit commitments as of
December 31, 1993, of which $360 million were unused and available.
The Company believes that its operating cash flow together with unused lines
of credit will be sufficient to finance current operating requirements
including capital expenditure, acquisition and restructuring programs.
Page 12 of 15
PART II. OTHER INFORMATION
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Item 6. Exhibits and Reports on Form 8-K
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(a) The following Exhibit is furnished pursuant to Item 601
of Regulation S-K:
Exhibit No. (11) Computation of Earnings Per Share
Page 13 of 15
BASIS OF PRESENTATION
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The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10Q and Rule 10-01 of
Regulation S-X. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K (as amended by Form 10-K/A filed on May 5, 1994) for the year ended
September 30, 1993.
Date May 5, 1994 /s/Michael J. Dillon
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Michael J. Dillon
Controller
SIGNATURES
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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.
ALCO STANDARD CORPORATION
Date May 5, 1994 /s/Michael J. Dillon
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Michael J. Dillon
Controller
(Chief Accounting Officer)
Page 14 of 15
Index to Exhibits
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Exhibit Number
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(11) Computation of Earnings Per Share