News Release
Charles R. Tilden Suzanne C. Shenk Martha A. Buckley
Vice President, Corporate Manager, Investor Director, Corporate
Affairs Relations Communication
610-993-3608 610-993-3526 610-993-3609
ALCO STANDARD ANNOUNCES DECISION TO SPIN OFF
UNISOURCE; LOWERS EARNINGS EXPECTATION FOR THIRD
QUARTER; ANNOUNCES RESTRUCTURING CHARGES
VALLEY FORGE, PA, June 19, 1996--Alco Standard Corporation (NYSE: ASN)
announced today that it will split its two operating units into independent
companies by spinning off its paper and supply systems distribution group,
Unisource Worldwide Inc., as a separate publicly owned company. Alco will
accomplish the transaction through a tax-free distribution of Unisource stock to
Alco shareholders and expects to complete the separation by the end of calendar
year 1996.
Strategic conflicts between Alco's two operating units--IKON Office
Solutions, the office technology solutions group, and Unisource--have
intensified in recent months, leading to the company's decision to separate the
two units. IKON's outsourcing business has grown rapidly and has increasingly
encountered significant competitive conflicts with Unisource's printing
customers. The separation of the two units into publicly owned companies will
allow both businesses to grow unencumbered by the strategic conflict.
Since April, Alco has examined a variety of options for separating the two
businesses. The company's Board of Directors has concluded that a spin-off will
generate the greatest value for Alco shareholders.
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"From the beginning we have been firmly committed to selecting the option
which will generate the highest value for our shareholders and which will treat
all of our constituents fairly," said John Stuart, Chairman and Chief Executive
Officer of Alco Standard. "We had substantial offers from potential buyers, but
we have concluded that a spin-off has the greatest upside potential for Alco
shareholders. It is the best option for Alco's investors to capture the value we
have created within Unisource through our investment in the group's strategic
transformation during the last three years. The current uncertainties in the
paper price cycle make it harder to capture full value for Alco shareholders
through a sale."
Alco will account for Unisource as a discontinued operation beginning in
the third quarter of fiscal 1996, as a result of the decision to spin off
Unisource.
Alco also announced that it anticipates lower than expected earnings in its
third fiscal quarter, which ends June 30. The company expects to earn
approximately $.49--$.51 per share from operations in the quarter, excluding
special charges, compared with a consensus market expectation of $.62 per share.
Alco earned $.50 per share in the third quarter of fiscal year 1995.
Performance at IKON Office Solutions, Alco's office technology solutions
group is expected to be strong in the third quarter with the group delivering
substantial growth in revenues and earnings over the same period of 1995. The
group is growing in each of its three market areas: analog copiers, outsourcing,
and digital networking. Internal growth is in line with expectations and, thus
far this quarter, the group has acquired companies in North America and Europe
which generate approximately $175 million in annualized revenue. IKON expects to
meet or exceed its financial goals for the quarter and the year.
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Alco's revised expectations are the result of lower than expected revenues
at Unisource, caused primarily by a significant decline in paper pricing
compared with last year. Paper prices are expected to average 13 percent lower
than last year's third quarter and 6 percent lower than this year's second
quarter. Reduced restructuring benefits in fiscal 1996 associated with delayed
implementation of Unisource's information technology system and distractions
caused by the sale/spin process are also contributing to the shortfall. However,
Alco still expects Unisource to deliver at least a 3.4 percent return on sales
in the quarter, which is equal to the return generated in last year's third
quarter when paper pricing was higher.
In addition, the company announced that it will take a one-time charge
against earnings of approximately $40-$50 million, or approximately $.20-$.25
per share, in the third quarter for new restructuring activities at Unisource.
The restructuring charge includes the cost of severance and facility closures
associated with the group's recently announced regional realignment in the
United States and facilities mergers in the U.S. and Canada.
Alco will also take a charge against earnings in the third quarter of $12-
$18 million, or approximately $.08--$.11 per share, for costs associated with
the disposition of Unisource.
Corporate earnings in the third quarter, including special charges, will
approximate $.13--$.23 per share.
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Unisource currently expects paper prices to remain well below 1995 levels
for the remainder of the fiscal year. Given that trend, Alco anticipates
earnings per share from operations for fiscal year 1996 to be $1.95--$2.00,
excluding the one-time charges. In 1995, Alco delivered earnings per share of
$1.81.
Alco Standard is headquartered in Valley Forge, Pennsylvania. Alco operates
the largest independent marketer of office technology solutions in North America
and the United Kingdom through IKON Office Solutions, and the largest marketer
and distributor of paper and supply systems in North America through Unisource.
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