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, 1995 or [ ] Transition
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report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
for the transition period from ________ to _______
Commission file number 1-5964
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ALCO STANDARD CORPORATION
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(Exact name of registrant as specified in its charter)
OHIO 23-0334400
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Box 834, Valley Forge, Pennsylvania 19482
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(Address of principal executive offices)
(Zip Code)
(610) 296-8000
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(Registrant's telephone number, including area code)
NONE
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(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
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* 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, 1995.
Common Stock, no par value 55,642,019 shares
INDEX
ALCO STANDARD CORPORATION
PART I. FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets--June 30, 1995
and September 30, 1994
Consolidated Statements of Income--Three months
ended June 30, 1995 and June 30, 1994
Nine months ended June 30, 1995 and June 30, 1994
Consolidated Statements of Cash Flows--Nine
months ended June 30, 1995 and June 30, 1994
Notes to Consolidated Financial Statements--
June 30, 1995
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition and Liquidity
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I. FINANCIAL INFORMATION
------------------------------
Item 1: Financial Statements (unaudited)
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ALCO STANDARD CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30 September 30
ASSETS 1995 1994
------ ----------- -----------
Current Assets
Cash $ 59,362 $ 53,369
Accounts receivable less allowance for doubtful accounts:
6/95 - $35,401; 9/94 - $29,428 1,076,705 915,495
Inventories 727,264 609,974
Prepaid expenses and deferred taxes 139,517 131,638
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Total current assets 2,002,848 1,710,476
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Investments and Long-Term Receivables 49,879 68,472
Property and Equipment, at cost 698,064 653,722
Less accumulated depreciation 333,293 299,775
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364,771 353,947
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Other Assets
Excess of cost of acquired companies over equity 1,013,632 747,629
Miscellaneous 94,933 59,331
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1,108,565 806,960
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Finance Subsidiaries Assets 868,886 562,403
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$ 4,394,949 $ 3,502,258
=========== ===========
See notes to consolidated financial statements.
ALCO STANDARD CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
June 30 September 30
LIABILITIES AND SHAREHOLDERS' EQUITY 1995 1994
------------------------------------ ------------ ------------
Current Liabilities
Current portion of long-term debt $ 21,913 $ 12,299
Notes payable 214,742 91,999
Trade accounts payable 500,555 500,166
Accrued salaries, wages and commissions 100,135 96,987
Deferred revenues 154,901 134,485
Restructuring costs 44,658 56,971
Other accrued expenses 260,949 164,023
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Total current liabilities 1,297,853 1,056,930
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Long-Term Debt 616,415 340,771
Other Liabilities
Deferred taxes 38,444 32,192
Restructuring costs 18,000 50,000
Workers' compensation and other 163,203 156,511
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219,647 238,703
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Finance Subsidiaries Liabilities;
including debt of: 6/95 - $715,032; 9/94 - $464,882 752,220 498,710
Shareholders' Equity
Series AA convertible preferred stock, no par value,
4,025 depositary shares issued and outstanding 201,421 199,912
Common stock, no par value:
Authorized 6/95 - 150,000 shares; 9/94 - 75,000 shares
Issued 6/95 - 55,779 shares; 9/94 - 54,522 shares 609,699 551,215
Retained earnings 737,605 642,634
Foreign currency translation adjustment (26,837) (22,550)
Cost of common shares in treasury: 6/95 - 180 shares;
9/94 - 74 shares (13,074) (4,067)
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1,508,814 1,367,144
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$ 4,394,949 $ 3,502,258
============ ============
See notes to consolidated financial statements.
ALCO STANDARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Three Months Ended Nine Months Ended
June 30 June 30
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1995 1994 1995 1994
-------- -------- -------- --------
Revenues
Net sales $2,569,420 $1,983,171 $7,155,565 $5,841,787
Dividends, interest and other income 1,855 970 3,417 2,819
Finance subsidiaries 24,603 17,183 64,331 47,922
---------- ---------- ---------- ----------
2,595,878 2,001,324 7,223,313 5,892,528
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Costs and Expenses
Cost of goods sold 1,927,030 1,458,835 5,352,518 4,340,153
Selling and administrative 545,504 448,230 1,547,434 1,304,670
Interest 15,378 10,876 42,375 33,157
Finance subsidiaries interest 10,872 7,074 27,469 19,901
---------- ---------- ---------- ----------
2,498,784 1,925,015 6,969,796 5,697,881
---------- ---------- ---------- ----------
Loss from Unconsolidated Affiliate (115,265) (117,158)
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Income Before Taxes 97,094 (38,956) 253,517 77,489
Taxes on Income 38,172 9,350 100,001 55,920
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Net Income 58,922 (48,306) 153,516 21,569
Preferred Dividends 2,893 2,893 8,679 8,679
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Net Income Available to Common Shareholders $ 56,029 $ (51,199) $ 144,837 $ 12,890
========== ========== ========== ==========
Earnings Per Share (1) $0.99 ($0.95) $2.59 $0.24
========== ========== ========== ==========
Cash dividends per share of common stock $0.26 $0.25 $0.78 $0.75
========== ========== ========== ==========
(1) See Exhibit 11 for computation of earnings per share.
See notes to consolidated financial statements.
ALCO STANDARD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
June 30,
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1995 1994
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Operating activities
Net income $ 153,516 $ 21,569
Additions (deductions) to reconcile net income to net
cash provided by operating activities:
Depreciation 56,046 51,840
Amortization 24,536 19,233
Payment of restructuring costs (38,329) (16,673)
Provision for losses on accounts receivable 16,764 15,675
Loss on disposition of investment in IMMOS 115,265
Changes in operating assets and liabilities, net
of effects from acquisitions and divestitures:
Increase in accounts receivable (143,454) (16,975)
Increase in inventories (82,444) (8,366)
Increase in prepaid expenses (14,812) (17,360)
Increase (decrease) in accounts payable,
deferred revenues and accrued expenses 73,647 (51,745)
Miscellaneous 1,180 (4,613)
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Net cash provided 46,650 107,850
Investing activities
Proceeds from sale of property and equipment 21,437 14,612
Payments received on long-term receivables 3,533 8,513
Cost of companies acquired, net of cash acquired (250,986) (27,376)
Expenditures for property and equipment (71,490) (77,438)
Purchase of miscellaneous assets (34,714) (5,440)
Finance subsidiaries receivables - additions (499,280) (286,034)
Finance subsidiaries receivables - collections 228,483 157,012
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Net cash used (603,017) (216,151)
Financing activities
Proceeds (repayments) from short-term borrowings, net 121,416 (5,278)
Proceeds from issuance of long-term debt 297,747 111,319
Proceeds from option exercises and sale of treasury shares 62,494 50,600
Proceeds from issuance of common stock, net 293,500
Long-term debt repayments (43,682) (333,474)
Finance subsidiaries debt - additions 370,161 139,880
Finance subsidiaries debt - repayments (120,011) (60,308)
Dividends paid (49,943) (45,147)
Purchase of treasury shares (75,822) (37,438)
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Net cash provided 562,360 113,654
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Net increase in cash 5,993 5,353
Cash at beginning of year 53,369 36,495
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Cash at end of period $ 59,362 $ 41,848
========= =========
See notes to consolidated financial statements.
ALCO STANDARD CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
Note 1: Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Rule
10-01 of Regulation S-X. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the year ended September 30, 1994.
Certain prior year amounts have been reclassified to conform with the current
year presentation.
Note 2: Debt
----
On December 1, 1994, the Company entered into a credit agreement with 14
banks to borrow up to $500 million. This multi-currency facility replaced three
other lines of credit amounting to approximately $415 million. The agreement
has two parts: $350 million is subject to termination on December 1, 1999; the
other $150 million is available for 364 days subject to annual renewal for
successive 364-day periods. Facility fees of 10 basis points per annum on the
five-year portion and 8 basis points per annum on the 364-day portion are
charged for these commitments. The agreement provides that loans may be made
under either domestic or Eurocurrency notes at rates computed under a selection
of rate formulas including prime or Eurocurrency rates. At the same time, the
Company has reduced the commitment under another agreement from $200 million to
$100 million.
Note 3: Supplemental Information to Statements of Cash Flows
----------------------------------------------------
The Company has presented statements of cash flows for the periods ended
June 30, 1995 and 1994 in accordance with SFAS No. 95.
Interest paid for the nine months ended June 30, 1995 was $72.3 million.
Interest paid for the nine months ended June 30, 1994 was $56.6 million.
Income tax payments of $32.5 million and $47.5 million were made during the
nine months ended June 30, 1995 and 1994, respectively.
The total assets for acquisitions amounted to $402.3 million during the
nine months ended June 30, 1995 and $84.7 million during the nine months ended
June 30, 1994. The excess of cost over acquired equity included in these assets
was $285.7 million and $35.7 million, respectively.
Note 4: Medium Term Notes Program
-------------------------
Effective July 1994, Alco Capital Resource, Inc. (ACR) began offering to
the public from time to time medium term notes having an aggregate initial
offering price not exceeding $500 million or the equivalent thereof in foreign
currency. On June 30, 1995, ACR increased the amount available to be offered
under its medium term notes program by $1 billion. As of June 30, 1995, $472
million of medium term notes were outstanding.
Note 5: Conversion Preferred Stock
--------------------------
In July 1995, the Company completed a public offering of approximately 3.9
million depositary shares, each representing 1/100 of a share of Series BB
Conversion Preferred Stock with a 6.5% dividend yield. Net proceeds were
approximately $290 million. The Series BB Conversion Preferred Stock will
automatically convert into the Company's common stock on October 1, 1998, unless
previously converted at the option of the holder. The number of shares of common
stock to be issued upon conversion will range from 3.2 million to 3.9 million,
depending upon the market price of the Company's common stock during the twenty
day period immediately prior to conversion.
Item 2: Management's Discussion and Analysis of Results of Operations and
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Financial Condition and Liquidity
---------------------------------
Results of Operations
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Three Months Ended June 30, 1995
Compared with Three Months Ended June 30, 1994
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Revenues and income (loss) before taxes for the third quarter of fiscal
1995 compared to the third quarter of fiscal 1994 were as follows:
Revenues Income Before Taxes
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June 30 % June 30 %
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1995 1994 Change 1995 1994 Change
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(in millions)
Alco Office Products $ 764 $ 589 29.7% $ 66.4 $ 54.1 22.7%
Unisource
United States 1,622 1,253 29.4 49.9 40.8 22.3
Canada 212 161 31.7 12.4 4.2
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Total Unisource 1,834 1,414 29.7 62.3 45.0 38.4
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Operating 2,598 2,003 29.7 128.7 99.1 29.9
Unconsolidated affiliate (115.3)
Interest (15.4) (10.9)
Eliminations and
non-Allocated (2) (2) (16.2) (11.9)
------ ------ ------ -------
$2,596 $2,001 29.7 $ 97.1 $ (39.0)
====== ====== ====== =======
The Company's revenues for the third quarter of fiscal year 1995 were $2.6
billion, 29.7% ahead of the comparable period in the prior year. Income before
taxes increased to $97.1 million from a loss of $39 million reported in the
third quarter of fiscal year 1994. Earnings per share were $.99 compared to
($.95) reported in the prior year. Excluding the loss on the sale of IMM Office
Systems GmbH (IMMOS), earnings per share for the third quarter 1994 were $.80.
Alco Office Products (AOP) generated $175 million in increased revenues of
which $105 million related to AOP's base companies and $70 million to current
and prior year acquisitions. Internal growth in AOP's base companies continues
to be across all revenue segments but primarily in equipment sales and
outsourcing businesses. Revenues from Unisource's U.S. operations increased by
$369 million, of which $24 million related to current and prior year
acquisitions. Unisource's Canadian operations increased their revenues by $51
million. The improvement in Unisource's revenues primarily reflects price
increases in its fine paper and supply systems businesses, however, Unisource
also enjoyed volume increases quarter to quarter.
AOP's operating income increased by $12.3 million. Current and prior year
acquisitions contributed $7.1 million. The remaining $5.2 million represents
the internal growth from its base companies. This growth primarily represents
higher operating contributions from the service, supply and outsourcing areas of
AOP's businesses, but also includes increased operating income related to its
leasing activities through Alco Capital Resource, Inc.(Alco Capital). Operating
margins were 8.7% in the third quarter of 1995 compared to 9.2% in 1994's third
quarter. Excluding costs related to its transformation program, the operating
margin was 9.3% for the third quarter of 1995.
Three Months Ended June 30, 1995 Compared with Three Months Ended June 30, 1994
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(Continued)
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Operating income from Unisource's U.S. paper operations increased $9.1
million which includes $7.8 million from its base companies and $1.3 million
from current and prior year acquisitions. The increase in operating income was
due to cost reductions gained as a result of Unisource's ongoing restructuring,
productivity gains and the impact from price and volume increases realized
during the quarter. The increase of $8.2 million in the Canadian paper
distribution business represents the positive effects of price and volume
increases in the printing paper business along with cost reductions resulting
from restructuring. Operating margins for the quarter increased from 3.2% for
the third quarter of 1994 to 3.4% for the third quarter of 1995.
Revenues from the Company's paper and office products operations outside
the U.S. were $284 million for the third quarter of fiscal 1995 compared to $209
million for the same period of the prior fiscal year. The increase includes $51
million from the Canadian paper distribution business and $3 million of internal
growth in the AOP Canadian operations. It also includes $21 million relating to
the European operations of Erskine and two companies acquired in September 1994.
Income from foreign operations was $18.3 million for the three months ended June
30, 1995, up $9.8 million from the prior year, primarily attributable to the
Canadian paper distribution business. In the quarter ended June 30, 1994, the
Company recorded a pre-tax loss of $115.3 million ($95.1 million, net of tax) on
the sale of its interest in IMMOS, equating to a loss per share of $1.75 for the
quarter. The investment in IMMOS was sold in September 1994.
Interest expense increased overall by approximately $4.5 million, a result
of increased borrowing levels and interest rates during fiscal 1995. The $136.1
million increase in income before taxes represents a $20.8 million earnings
improvement relating to the base companies along with earnings contributed by
acquisitions, and the $115.3 million loss on the sale of the investment in IMMOS
recorded in the third quarter of 1994. Income taxes in 1994 include a $20.2
million benefit on the loss on IMMOS. The effective income tax rate for the
third quarter 1995 was 39.3% compared with 38.7% for the comparative period in
1994, excluding the effect of the IMMOS loss. Weighted average shares of 56.4
million for the third quarter of fiscal 1995 were 2.5 million shares greater
than the 53.9 million for the prior year's third quarter, primarily a result of
shares issued in connection with acquisitions.
In May 1995, AOP signed a distribution agreement with Oce van der Grinten
N.V., a Netherlands-based manufacturer and distributor of office equipment
(Oce). The agreement grants AOP distribution rights in the U.S. for the Oce
high volume model copiers. Oce's products are new to the American market, but
well-known in Europe. Oce's products are recognized for their speed, quality
and durability. The Company believes that Oce's superior quality, high volume
copiers will allow AOP to compete for the first time in this attractive segment
of the copier market which represents nearly one-quarter of total copy volume in
the United States.
Nine Months Ended June 30, 1995
Compared with Nine Months Ended June 30, 1994
---------------------------------------------
Revenues and income before taxes for the first nine months of fiscal 1995
compared to the first nine months of fiscal 1994 were as follows:
Revenues Income Before Taxes
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June 30 % June 30 %
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1995 1994 Change 1995 1994 Change
------- ------- -------- ------ ------- --------
(in millions)
Alco Office Products $2,098 $1,632 28.6% $180.6 $ 144.4 25.1%
Unisource
United States 4,540 3,786 19.9 128.4 104.0 23.5
Canada 591 480 23.1 29.5 9.4
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Total Unisource 5,131 4,266 20.3 157.9 113.4 39.2
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Operating 7,229 5,898 22.6 338.5 257.8 31.3
Unconsolidated affiliate (117.2)
Interest (42.4) (33.2)
Eliminations and
non-Allocated (6) (5) (42.6) (29.9)
------ ------ ------ -------
$7,223 $5,893 22.6% $253.5 $ 77.5
====== ====== ====== =======
Nine Months Ended June 30, 1995 Compared with Nine Months Ended June 30, 1994
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(Continued)
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Revenues of the Company for the first nine months of 1995 were $7.2
billion, an increase of 22.6% over the prior year. Income before taxes for the
first nine months of 1995 increased to $253.5 million from $77.5 million for the
first nine months of 1994. Earnings per share were $2.59 compared to $.24
reported in the prior year. Excluding the loss on the sale of IMMOS, earnings
per share for the first nine months of 1994 were $2.04.
AOP contributed $466 million of additional revenues, of which $69 million
related to fiscal 1994 acquisitions and $111 million to fiscal 1995
acquisitions. The remaining $286 million increase reflects continued internal
growth in all revenue areas of AOP's base companies, but particularly in its
equipment sales and outsourcing businesses. The $754 million increase in
revenues from Unisource's U.S. operations includes $9 million from prior year
acquisitions and $38 million from current year acquisitions. The remaining $707
million increase reflects internal growth from its base companies primarily
related to price increases. The $111 million revenue increase in the Unisource
Canadian paper businesses is attributable to price and volume increases in the
fine paper and supply systems businesses net of the negative impact from foreign
exchange rates of approximately $14 million in fiscal year 1995.
AOP's operating income increase of $36.2 million includes $6.1 million from
prior year acquisitions and $10.4 million from current year acquisitions. The
remaining $19.7 million increase reflects internal growth from its base
companies which is primarily the result of higher operating contributions from
the service, supply and outsourcing areas of AOP's businesses, along with
increased operating income related to its leasing activities through Alco
Capital. Operating margins were 8.6% year-to-date 1995 compared to 8.8% year-
to-date 1994. Excluding costs related to the AOP transformation program, the
operating margin was 9.0% for the nine months ended June 30, 1995.
Operating income from Unisource's U.S. paper operations increased $24.4
million. This increase represents a contribution of $2.3 million from current
and prior year acquisitions. The remaining $22.1 million is from its base
companies which reflects the impact of price and volume increases along with the
cost reductions realized from the restructuring. The Canadian paper
distribution business increase in operating income of $20.1 million is the
result of the growth and price increases in the fine paper distribution business
and cost reductions. Operating margins for the nine month period increased from
2.7% in 1994 to 3.1% in 1995.
Geographically, revenues from the Company's paper and office products
operations outside the U.S. were $803 million for the first nine months of
fiscal 1995 compared to $621 million for the same period in the prior fiscal
year. The increase reflects $111 million from the Canadian paper distribution
business and $11 million of internal growth in the AOP Canadian operations. It
also reflects $60 million relating to the European operations of Erskine and two
companies acquired in September 1994. Operating income from foreign operations
was $44.3 million for the nine months ended June 30, 1995 up $23.8 million from
the prior year primarily the result of the increase in operating income of the
Canadian paper distribution business. For the first nine months of fiscal 1994,
the Company recorded a $117.2 million loss from its investment in IMMOS which
includes a $1.9 million loss on its investment as of March 31, 1994 along with
the $115.3 million loss recorded in the third quarter related to the sale of
IMMOS.
Interest expense increased by $9.2 million from the comparable period in
fiscal 1994, a result of higher borrowing levels and interest rates during
fiscal 1995, offset by the effect of the debt reduction resulting from the
Company's common stock offering in December 1993. The increase in income before
taxes of $176 million consists of $58.8 million relating to the combined result
of improved operations from our base companies along with the earnings
contributed by acquisitions and the $117.2 million loss on the investment in
IMMOS recorded in 1994. The effective income tax rate for the current period
was 39.4% compared with 39.5% in fiscal 1994 excluding the effect of the sale of
IMMOS. At June 30, 1995 weighted average shares were 3 million shares greater
than the 53 million shares at June 30, 1994. This increase includes the impact
of a public offering of common stock in December 1993 and acquisition activity.
Nine Months Ended June 30, 1995 Compared with Nine Months Ended June 30, 1994
-----------------------------------------------------------------------------
(Continued)
----------
The major components of the Unisource restructuring plan are proceeding as
planned. Unisource management has reduced the pace at which changes are being
made in order to better control the transformation process, thereby affecting
the pace of planned headcount reductions and the timing of originally
anticipated cost reductions. Unisource expects to achieve the full benefit of
the projected $100 million net cost reductions resulting from the completion of
the restructuring in fiscal 1997. The restructuring reserve at June 30, 1995 is
$62.7 million, which management continues to believe is adequate to complete the
restructuring plan.
AOP has initiated a three year transformation program to change its
organization into a more cohesive and efficient network by building a uniform
information technology system and implementing best practices for critically
important management functions throughout the AOP companies. The initiative
will include the exploration of new vendor alliances, the establishment of a
national identity for the group, and a targeted national accounts program.
As previously indicated, the Company was in arbitration with a former
subsidiary, which had asserted that the Company was liable for certain
liabilities arising under the Coal Industry Health Benefit Act of 1992. During
the second quarter of fiscal 1995, the Company agreed to pay $10 million to the
former subsidiary to settle this claim, which primarily has been charged against
existing reserves for discontinued operations. The Company paid $5 million
during the second quarter with the remaining $5 million to be paid over the next
four years.
Financial Condition and Liquidity
---------------------------------
Debt, excluding finance subsidiaries, was $853 million at June 30, 1995, an
increase of $408 million from the Company's debt balance at September 30, 1994
of $445 million. This increase in borrowing levels was primarily to satisfy the
Company's working capital and acquisition requirements. On December 1, 1994,
the Company entered into a new credit agreement to borrow up to $500 million.
This multi-currency facility replaced three other lines of credit amounting to
approximately $415 million. At the same time, the Company also reduced the
commitment under another agreement from $200 million to $100 million. The
Company had a total of $600 million in bank credit commitments as of June 30,
1995. Short-term borrowings supported by these facilities totaled $478 million,
leaving $122 million unused and available. As of June 30, 1995, $270 million of
these short-term borrowings were reclassified as long-term debt due to the
Company's intention to repay this debt with the proceeds from the July 1995
preferred stock offering described below. At June 30, 1995, debt as a percentage
of capitalization was 36.1% and the current ratio was 1.5 to 1. In July 1995,
Moody's Investor Services upgraded the Company's debt rating to A3, from Baa1.
In June 1995, Erskine Limited, Alco's U.K. subsidiary, acquired Southern
Business Group PLC, a publicly held U.K. company, for a purchase price of
approximately $131 million. Southern sells, leases, services and remanufactures
copiers and other office equipment in Southern England and has annual revenues
of $86 million.
On June 30, 1995, the Company announced that it had reached an agreement in
principal to sell its Central Products Company subsidiary. Central Products has
annual revenues of approximately $125 million. The transaction is subject to
several conditions, including financing, which are expected to be satisfied
prior to the end of Alco's fiscal year. The Company does not expect to
recognize a loss in connection with the transaction.
In July 1995, the Company completed a public offering of approximately 3.9
million depositary shares, each representing 1/100 of a share of Series BB
Conversion Preferred Stock. The Series BB Preferred Stock will carry a dividend
yield of 6.5% and will automatically convert into the Company's common stock on
October 1, 1998 unless previously converted at the option of the holder. The
purpose of the offering is to fund the Company's ongoing acquisition program.
Net proceeds of approximately $290 million were used to repay short-term
borrowings incurred to fund working capital requirements and acquisitions.
The Company's change in cash from operating activities during the first
nine months of fiscal 1995 primarily relates to working capital requirements.
Unisource's working capital primarily reflects the effects of substantial price
increases presently being experienced in the paper business along with the
increased sales volume. Changes relating to AOP primarily relate to inventory
resulting from both growth in the business along with supplier price increases.
The Company estimates that total cash expenditures in connection with the
Unisource restructuring plan will amount to $148 million. In addition to the
$52 million spent through fiscal 1994, $38 million was expended in the first
nine months of fiscal 1995, totaling $90 million spent to date. Unisource
anticipates spending an additional $15 million during the remainder of fiscal
1995.
Finance subsidiaries debt grew by $250 million from September 30, 1994, a
result of increased leasing activity. During the nine months ended June 30,
1995, Alco Capital issued an additional $367 million under its Medium Term Notes
Program which began in July 1994. At June 30, 1995, $472 million of the $500
million available under this program was outstanding. On June 30, 1995, Alco
Capital increased the amount available to be offered under its Medium Term Note
Program by $1 billion. Under its $125 million asset securitization agreement
commenced in September 1994, Alco Capital sold an additional $58 million in
direct financing leases during the first nine months of fiscal 1995, replacing
those leases liquidated and leaving the total amount of contracts sold
unchanged.
The Company believes that its operating cash flow together with unused
lines of credit and other financing arrangements will be sufficient to finance
current operating requirements including capital expenditure, acquisition and
restructuring and transformation programs.
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
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(a) The following Exhibits are furnished pursuant to Item 601 of
Regulation S-K:
Exhibit No. (11) Computation of Earnings Per Share
Exhibit No. (27) Financial Data Schedule
(b) Reports on Form 8-K
On July 21, 1995, the Company filed a report on Form 8-K to report
its third quarter results and to announce the offering of 3,400,000
depositary shares, each representing 1/100 of a share of Series BB
Conversion Preferred Stock .
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 August 10, 1995 /s/ Michael J. Dillon
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Michael J. Dillon
Vice President and Controller
(Chief Accounting Officer)
INDEX TO EXHIBITS
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Exhibit Number
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(11) Computation of Earnings Per Share
(27) Financial Data Schedule