<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
April 30, 1997 1-6528
- -------------------------------------- ----------------------------
For the quarterly period ended Commission file number
WALLACE COMPUTER SERVICES, INC.
------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-2515832
- -------------------------------------- ------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2275 Cabot Drive Lisle, Illinois 60532
-------------------------------------------- -------------
(Address of Principal Executive Offices) (ZIP CODE)
(630) 588-5000 43,066,106
- -------------------------------------- ---------------------------------
(Registrant's Telephone Number, (Number of Common Shares
Including Area Code) Outstanding as of May 31, 1997)
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.
X Yes No
----- -----
<PAGE>
Wallace Computer Services, Inc. Page 2
FORM 10-Q
For Quarterly Period Ended April 30, 1997
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The information furnished herein reflects all adjustments which are, in
the opinion of the management, necessary to a fair statement of the
results of operations and financial position for the nine months ended
April 30, 1997, subject to year-end audit by independent public
accountants. These adjustments are of a normal, recurring nature.
Wallace Computer Services, Inc. and Subsidiary
Consolidated Income Statement (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
April 30
-------------------------------------------------------
% %
1997 Sales 1996 Sales
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net Sales $672,038,000 100.0 $647,745,000 100.0
Cost and Expenses
Cost of goods sold (Note 1) 409,969,000 61.0 406,648,000 62.8
Selling and administrative expenses 122,632,000 18.2 112,915,000 17.4
Provision for depreciation and
amortization 36,679,000 5.5 33,280,000 5.1
Hostile takeover expenses 0 0.0 8,683,000 1.3
----------- ---- ----------- ----
Total costs and expenses $569,280,000 84.7 $561,526,000 86.7
----------- ---- ----------- ----
Operating Income 102,758,000 15.3 86,219,000 13.3
----------- ---- ----------- ----
Interest income (1,468,000) (0.2) (1,995,000) (0.3)
Interest expense 1,744,000 0.3 955,000 0.1
----------- ---- ----------- ----
Income before Income Taxes 102,482,000 15.2 87,259,000 13.5
Provision for Income Taxes (Note 4) 40,480,000 6.0 33,460,000 5.2
----------- ---- ----------- ----
Net Income $62,002,000 9.2 $53,799,000 8.3
----------- ---- ----------- ----
----------- ---- ----------- ----
Net Income per Share $1.43 $1.18
----- -----
----- -----
Average Common Shares Outstanding 43,425,000 45,546,000
----------- -----------
----------- -----------
Dividends Declared Per Share $0.4200 $0.3225
------- -------
------- -------
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. Page 3
FORM 10-Q
For Quarterly Period Ended April 30, 1997
Wallace Computer Services, Inc. and Subsidiary
Consolidated Income Statement (Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
April 30
-------------------------------------------------------
% %
1997 Sales 1996 Sales
------------------------- -------------------------
<S> <C> <C> <C> <C>
Net Sales $225,807,000 100.0 $213,762,000 100.0
Cost and Expenses
Cost of goods sold (Note 1) 141,613,000 62.7 133,781,000 62.6
Selling and administrative expenses 39,469,000 17.5 38,233,000 17.9
Provision for depreciation and
amortization 12,625,000 5.6 11,781,000 5.5
Hostile takeover expenses 0 0.0 1,772,000 .8
----------- ---- ----------- ----
Total costs and expenses $193,707,000 85.8 $185,567,000 86.8
----------- ---- ----------- ----
Operating Income 32,100,000 14.2 28,195,000 13.2
----------- ---- ----------- ----
Interest income (429,000) (0.2) (582,000) (0.3)
Interest expense 686,000 0.3 402,000 0.2
----------- ---- ----------- ----
Income before Income Taxes 31,843,000 14.1 28,375,000 13.3
Provision for Income Taxes (Note 4) 12,578,000 5.6 10,924,000 5.1
----------- ---- ----------- ----
Net Income $19,265,000 8.5 $17,451,000 8.2
----------- ---- ----------- ----
----------- ---- ----------- ----
Net Income per Share $0.45 $0.38
----- -----
----- -----
Average Common Shares Outstanding 43,119,000 45,719,000
----------- -----------
----------- -----------
Dividends Declared Per Share $0.1400 $0.1075
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 4
Consolidated Balance Sheet
<TABLE>
<CAPTION>
April 30, 1997 July 31, 1996
(Unaudited) (Audited)
-------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $0 $23,618,000
Short-term investments 2,844,000 39,025,000
Accounts receivable 170,991,000 152,133,000
Less-allowance for doubtful accounts 3,405,000 3,215,000
-------------- -------------
Net receivables 167,586,000 148,918,000
Inventories (Note 1) 78,125,000 71,332,000
Prepaid taxes 18,151,000 15,138,000
Advances and prepaid expenses 4,919,000 6,077,000
-------------- -------------
Total current assets 271,625,000 304,108,000
-------------- -------------
Property, plant and equipment, at cost 590,876,000 557,069,000
Less-reserves for depreciation and amortization 298,320,000 268,197,000
-------------- -------------
Net property, plant and equipment 292,556,000 288,872,000
-------------- -------------
Intangible assets arising from acquisitions 43,178,000 43,180,000
Cash surrender value of life insurance 39,462,000 32,244,000
Systems development costs 23,658,000 21,499,000
Other assets 5,669,000 5,947,000
-------------- -------------
Total assets $676,148,000 $695,850,000
-------------- -------------
-------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-term borrowings $20,000,000 $0
Current portion long-term debt 7,100,000 0
Accounts payable 33,411,000 46,044,000
Accrued salaries, wages, profit sharing and other 54,118,000 51,826,000
-------------- -------------
Total current liabilities 114,629,000 97,870,000
-------------- -------------
Long-term debt 23,500,000 30,600,000
Deferred income taxes 31,823,000 32,187,000
Deferred compensation and retirement benefits 27,913,000 24,750,000
Stockholders' equity
Common stock (Note 2)- issued shares of
45,764,054 at April 30, 1997 and July 31, 1996 45,764,000 45,764,000
Treasury stock (at cost)- 2,730,548 shares at
April 30, 1997 and 177,216 shares at
July 31, 1996 (79,520,000) (5,176,000)
Additional capital 32,819,000 32,616,000
Retained earnings 479,439,000 437,459,000
Unrealized loss on securities (219,000) (220,000)
-------------- -------------
Total stockholders' equity 478,283,000 510,443,000
-------------- -------------
Total liabilities and stockholders' equity $676,148,000 $695,850,000
-------------- -------------
-------------- -------------
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 5
Consolidated Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
For the Nine Months Ended
April 30
-----------------------------------
1997 1996
Cash Flows from Operating Activities: --------------- ---------------
<S> <C> <C>
Net income from operations $62,002,000 $53,799,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 36,679,000 33,280,000
Deferred taxes (364,000) 3,464,000
(Gain)/loss on disposal of property (27,000) (34,000)
Changes in assets and liabilities
Accounts receivable (17,442,000) (7,700,000)
Inventories (6,581,000) (4,280,000)
Advances and prepaid expenses (1,825,000) (3,259,000)
Other assets (12,933,000) (13,859,000)
Accounts payable and other liabilities (12,187,000) 10,974,000
Accrued income taxes 0 (2,056,000)
Deferred compensation and retirement benefits 3,163,000 2,498,000
--------------- ---------------
Net cash provided by operating activities 50,485,000 72,827,000
--------------- ---------------
Cash Flows from Investing Activities:
Capital expenditures (30,750,000) (46,180,000)
Short-term investments 36,181,000 6,474,000
Proceeds from disposal of property 185,000 159,000
Unrealized gain/loss on securities 1,000 (60,000)
Purchase of Post Printing (6,586,000) 0
Purchase of FEC 0 (34,807,000)
Sale of Lasermax 0 5,641,000
--------------- ---------------
Net cash used in investing activities (969,000) (68,773,000)
--------------- ---------------
Cash Flows from Financing Activities:
Treasury stock transactions (76,203,000) 5,382,000
Cash dividends paid (16,835,000) (14,000,000)
Amounts paid on long-term debt 0 (205,000)
Proceeds from issuance of short-term debt 30,000,000 4,216,000
Proceeds from issuance of long-term debt 0 5,000,000
Amounts paid on short-term and acquired debt (10,000,000) (4,216,000)
Proceeds from construction funds held by trustee (96,000) 3,165,000
--------------- ---------------
Net cash used in financing activities (73,134,000) (658,000)
--------------- ---------------
Net changes in cash and cash equivalents (23,618,000) 3,396,000
Cash and cash equivalents at beginning of year 23,618,000 10,815,000
--------------- ---------------
Cash and cash equivalents at April 30 $0 $14,211,000
--------------- ---------------
--------------- ---------------
Supplemental Disclosure:
Interest paid (net of interest capitalized) $ 559,000 $ (172,000)
Income taxes paid (net of refunds received) 43,540,000 35,600,000
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Wallace Computer Services, Inc. and Subsidiary Page 6
Notes to Consolidated Financial Statements
April 30, 1997
(Unaudited)
Note 1 - Inventories
Inventories at April 30, 1997, and July 31, 1996, were as follows:
April 30, 1997 July 31, 1996
------------------- --------------------
Raw materials $17,119,000 $20,470,000
Work in process 2,823,000 1,771,000
Finished products 58,183,000 49,091,000
------------------- --------------------
$78,125,000 $71,332,000
------------------- --------------------
------------------- --------------------
Certain inventories are stated on the last-in, first-out (LIFO) basis
for their labor and material content, and other inventories are stated
on the first-in, first-out (FIFO) basis.
Because the inventory determination under the LIFO method can only be
made at the end of each fiscal year based on the inventory levels and
costs at that time, interim period LIFO determinations must necessarily
be based upon management's estimates of expected year-end inventory
levels and costs.
Note 2 - Stock Options
As of April 30, 1997, options to purchase 1,547,312 shares of common
stock were outstanding and 2,307,539 shares of common stock were
available for future grants under the Company's Stock Option and
Employee Stock Purchase Plans. On February 28, 1997, the shareholders
approved the 1997 Stock Incentive Plan (previously filed on the
Registrant's Quarterly Report on Form 10-Q dated January 31, 1997, and
incorporated herein by reference to such Report) which increased the
number of shares available by 2,000,000 shares. The number of option
shares outstanding and available have been adjusted for the two-for-one
stock split in July 1996.
The Company has authorized 100,000,000 shares of common stock and
issued 45,764,054 as of April 30, 1997. Of these shares, 2,730,548
were held in treasury as of April 30, 1997. The number of shares held
in treasury at July 31, 1996 was 177,216. The shareholders approved a
proposal to increase the number of authorized shares from 50 million to
100 million (see Item 4-Submission of Matters to a Vote of Security
Holders) at the special meeting on February 28, 1997.
Note 3 - Changes in Accounting
The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 121 on accounting for the
impairment and/or disposal of long-lived assets, certain identifiable
intangibles and goodwill related to assets to be held and used. As
required, the Company will adopt SFAS No. 121 for the fiscal year ended
July 31, 1997. At this time, it is the opinion of management that the
adoption of this statement will not have any material impact on the
results of operations or the consolidated financial position of the
Company.
The FASB issued a new standard, SFAS No. 123 on accounting for stock-
based compensation that the Company will adopt for the fiscal year
ended July 31, 1997. As permitted, the Company will continue its
current method of accounting for stock-based compensation and will
comply with the new disclosure requirements of this standard.
<PAGE>
Wallace Computer Services, Inc. Page 7
FORM 10-Q
For Quarterly Period Ended April 30, 1997
The FASB issued a new standard, SFAS No.128 on Earnings Per Share
disclosure which is effective for financial statements for periods
ending after December 15, 1997. The Company will adopt this statement
and reflect its disclosures in the Company's fiscal 1998 financial
statements. SFAS 128 requires dual presentation of basic and diluted
earnings per share, as defined, for current and prior periods.
Earnings per share were as follows:
Basic Diluted
----------- -------------
Third Quarter-1997 .45 .44
Third Quarter-1996 .38 .38
Year to Date-1997 1.43 1.42
Year to Date-1996 1.18 1.17
Note 4 - Income Taxes
Effective August 1, 1996, the Company increased its effective tax rate
from 38.5% to 39.5%. The income tax rate in the third quarter of
fiscal 1996 was 38.5% and was 38.3% for the first three quarters. The
increase in the tax rate for fiscal 1997 is due to the reduction of
tax-exempt investment income as a result of diminished cash due to the
stock repurchase program.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
Results of Operations
-------------------------
There have been no material changes in financial condition since the
preceding fiscal year which ended July 31, 1996.
For the three month period ended April 30, 1997, net sales increased
5.6% to $225,807,000. Net income for the third quarter increased 10.4%
to $19,265,000 or 45 cents per share, from $17,451,000 or 38 cents per
share in fiscal 1996. Pretax income for the quarter was up by
$3,468,000 or 12.2%.
For the nine month period ended April 30, 1997, net sales increased
3.8% to $672,038,000. Net income for the three quarters increased
15.2% to $62,002,000 or $1.43 per share, from $53,799,000 or $1.18 per
share in fiscal 1996. Pretax income for the three quarters increased
$15,223,000 or 17.4%.
The sales increase was affected by changing paper prices for both the
quarter and 9 month periods. Our estimate of unit growth for the
current year is 11% over last year. Unit growth has been offset by
lower selling prices due to lower paper prices. In the second half of
fiscal 1996, paper price deflation began affecting net sales.
Cost of goods sold represented 62.7% of sales versus 62.6% in the third
quarter of fiscal 1996. The third quarter of fiscal 1997 includes a
LIFO credit of $485,000 or 0.7 cents per share. The LIFO credit for
the third quarter of fiscal 1996 was $4,032,000 or 5.4 cents per share.
Cost of goods sold for the three quarters was 61.0% in fiscal 1997
versus 62.8% in fiscal 1996. Total LIFO credits for the three quarters
were $1,456,000 or 2.0 cents per share. The LIFO credit for the three
quarters of 1996 was $5,046,000 or 6.8 cents per share.
<PAGE>
Wallace Computer Services, Inc. Page 8
FORM 10-Q
For Quarterly Period Ended April 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
- --------------------------------------------------------------------------------
Selling and administrative expenses were 17.5% of sales in 1997 versus
17.9% in the third quarter of last year. For the first three quarters
of fiscal 1997, expenses are 18.2% of sales versus 17.4% in fiscal
1996. Included in the first half of fiscal 1997 is $787,000 of
expenses related to the proxy contest over the Wyser-Pratte proposals
to amend our bylaws. The Wyser-Pratte proposals were not adopted by
the shareholders. On November 8, 1996, Mr. Wyser-Pratte voluntarily
dismissed the Wyser-Pratte litigation (previously filed on the
Registrant's Quarterly Report on Form 10-Q dated October 31, 1996, and
incorporated herein by reference to such Report). As such, there were
no additional expenses related to the Wyser-Pratte proposals in the
third quarter. Third quarter selling and administrative expenses are
lower than previous quarters due to lower volume rebates at TOPS plus a
$666,000 credit from reducing the value of phantom stock held by
executive management to market value at April 30, 1997. This credit
from the change in market value for phantom stock added 1 cent per
share for the quarter.
The provision for depreciation and amortization is up 10.2% in the
first three quarters from fiscal 1996. This increase is the result of
the Company's continued reinvestment in capital resources and system
development.
Interest income for the first three quarters decreased by $527,000 or
26.4% from the same period one year ago. The reduction is due to the
decrease in cash and short-term investments attributable to
reinvestment in the Company through capital expenditures, acquisitions
and the $100 million stock repurchase program approved by the Board of
Directors in June of 1996. The June 1996 stock repurchase program was
completed in April 1997. Interest expense, which is shown net of
capitalized interest, increased $789,000 or 82.6% between years. The
increase of interest expense is mainly attributable to a $5,000,000
increase in debt related to the FEC acquisition in fiscal 1996 and $30
million borrowed under the $50 million revolving credit agreement (see
paragraph 4 in the Liquidity and Capital Resources section).
Operating income for the quarter was up $3,905,000 or 13.8%. For the
first three quarters, operating income was up $16,539,000 or 19.2%.
For fiscal 1997 this represents 15.2% to sales versus 13.5% for fiscal
1996.
Liquidity and Capital Resources
-----------------------------------
Working capital decreased by $49,242,000 from July 31, 1996, primarily
due to the $100 million stock repurchase program. The current ratio at
April 30, 1997 was 2.4. Long-term debt is comprised of industrial
revenue bonds at rates ranging from 3.5% to 3.7%. Long-term debt
currently represents 4.7% of total capitalization.
Capital expenditures for the first nine months totaled $30,750,000.
For the full fiscal year, capital expenditures are expected to be $40.0
million, which are expected to be financed through internally generated
funds and by borrowing against our short-term lines of bank credit.
Stockholders' equity decreased 6.3% to $478,283,000 at April 30, 1997.
The decrease is attributable to our stock repurchase program.
<PAGE>
Wallace Computer Services, Inc. Page 9
FORM 10-Q
For Quarterly Period Ended April 30, 1997
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (Continued)
- --------------------------------------------------------------------------------
During the first quarter of fiscal 1997, the Company opened a $50
million revolving credit agreement with two local banking institutions.
The Company has borrowed $30.0 million at an interest rate of 5.8%
under this revolving credit facility during the second and third
quarters due to the stock repurchase program. During the third
quarter, the Company paid back $10 million of the $30 million borrowed.
On May 16, 1997, the Board of Directors authorized the repurchase of an
additional $100 million of the Company's stock. The Company intends to
finance the stock repurchase program through both working capital
generated from operations as well as by utilizing lines of credit.
Current inventory levels are believed to be in-line with the inventory
levels necessary to satisfy customer demand. The company anticipates
having adequate sources of supply of raw materials to meet future
business requirements.
Common Stock
----------------
On September 4, 1996, the Board of Directors increased the annualized
dividend rate to $.56 per share, a 30.2% increase from fiscal 1996.
Other
---------
On October 22, 1996, the Company completed the acquisition of Post
Printing. The acquisition was a cash transaction and was accounted for
using the purchase method. Though the acquisition is anticipated to be
additive to fiscal 1997 earnings, it is not expected to have a material
impact.
<PAGE>
Wallace Computer Services, Inc. Page 10
FORM 10-Q
For Quarterly Period Ended April 30, 1997
PART II OTHER INFORMATION
Items 1 thru 3 None
- --------------
Item 4 Submission of Matters to a Vote of Security Holders
- --------------------------------------------------------------------------------
The Company held a special meeting of stockholders on February 28, 1997 to vote
on two proposals. The results are as follows:
1) Amend the Company's Restated Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 50 million to 100 million.
For Against Abstain
----------- --------- -------
35,919,718 1,982,977 97,229
2) Adopt the Company's 1997 Stock Incentive Plan
For Against Abstain
----------- --------- -------
36,722,209 1,089,096 188,619
Item 5 None
- --------------
Item 6 Exhibits
- --------------------
(a) Exhibits
10.1 Amendment to the Employee Stock Purchase Plan
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the Company during the
quarter ended April 30, 1997.
<PAGE>
Page 11
Wallace Computer Services, Inc.
FORM 10-Q
For Quarterly Period Ended April 30, 1997
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.
WALLACE COMPUTER SERVICES, INC.
6/11/97 /s/ Robert J. Cronin
- ------------------------ ----------------------------------------
Date Robert J. Cronin
President and Chief Executive Officer
6/11/97 /s/ Michael J. Halloran
- ------------------------ ----------------------------------------
Date Michael J. Halloran
Vice President, Chief Financial Officer,
and Assistant Secretary
(Principal Accounting Officer)
<PAGE>
Exhibit 10.1
WALLACE COMPUTER SERVICES, INC.
EMPLOYEE STOCK PURCHASE PLAN
AMENDMENT NO. 7
This Amendatory Agreement adopted as of the first day of January, 1997, by
Wallace Computer Services, Inc., a Delaware corporation (hereinafter referred to
as the "Company"), having its principal place of business in Lisle, Illinois.
W I T N E S S E T H:
WHEREAS, the Plan permits the Company to amend the Plan subject to the
terms and conditions therein specified;
WHEREAS, the Board of Directors ("Directors") of the Company by action
taken as of November 6, 1996, authorized the amendments hereinafter set forth;
WHEREAS, the Directors have determined that the amendments set forth in
paragraphs 2 and 4 below require prior approval by the Stockholders of the
Company pursuant to Section 17 of the Plan, and shall submit said amendments to
the Stockholders at their next scheduled meeting;
1. Section 3(a) of the Plan shall be and hereby is amended to read as
follows:
(a) Any person who (i) qualifies as an Employee as of the
commencement date of an Offering and (ii) has completed thirty-
one (31) days of continuous employment with the Company or any
Subsidiary shall be eligible to participate in such Offering,
subject to the limitations imposed by Section 423(b) of the Code.
Effective as of January 1, 1998, subject to the approval thereby by the
Stockholders of the Company, Section 4 of the Plan shall be and hereby is
amended to reflect Arabic Offering Numbers and to add the following offering
periods:
<PAGE>
OFFERING COMMENCEMENT TERMINATION
NUMBER DATE DATE
47 January 1, 1998 June 30, 1998
48 July 1, 1998 December 31, 1998
49 January 1, 1999 June 30, 1999
50 July 1, 1999 December 31, 1999
51 January 1, 2000 June 30, 2000
52 July 1, 2000 December 31, 2000
53 January 1, 2001 June 30, 2001
54 July 1, 2001 December 31, 2001
55 January 1, 2002 June 30, 2002
56 July 1, 2002 December 31, 2002
57 January 1, 2003 June 30, 2003
58 July 1, 2003 December 31, 2003
59 January 1, 2004 June 30, 2004
60 July 1, 2004 December 31, 2004
3. Section 5 of the Plan shall be and hereby is amended to read as
follows:
5. PARTICIPATION.
(a) An eligible Employee may elect to become a Participant
in the Plan by completing an authorization for payroll deduction
on the form provided by the Company and filing it with the
payroll office at least seven (7) days prior to the applicable
Offering Commencement Date.
(b) Payroll deductions for a Participant shall commence on
the payroll date on or next succeeding the effective date
specified in his authorization ("Effective Date"), which shall
not be earlier than the first offering Commencement Date
following the thirty-first day of continuous employment of the
Participant with the Company or any Subsidiary; and shall,
continue until terminated as provided in Paragraph 10 herein.
4. Sections 7 and 8 shall be and hereby are amended to delete the word
"full" wherever it appears before the word "shares".
<PAGE>
5. Section 9 of the Plan shall be and hereby is amended to read as
follows:
9. Delivery.
As promptly as practicable after the termination date of
each Offering, the Company will deliver to each Participant the
Stock purchased upon the exercise of his or her Option in full
shares only. The Company shall refund, without interest, the
balance of any payroll deductions credited to his account during
such Offering which were not used for the purchase of Stock.
A Participant may elect to have his or her shares of Stock
credited to a Company approved brokerage account in the name of
such Participant instead of receiving certificates. For any
Offering in which the Participant has elected to have his or her
Stock deposited in such brokerage account, the Company will
deposit shares representing the number of shares purchased upon
the exercise of the Option, which may include fractional shares,
as promptly as possible after each Offering. The Company will
advise each Participant as to the number of shares of Stock
deposited.
6. Effective as of January 1, 1998, subject to the approval by the
Stockholders of the Company, the first sentence of Section 11(a) of the Plan
shall be and is hereby amended to read as follows:
(a) The aggregate number of shares of Stock of the Company which
may be issued pursuant to options granted under this Plan shall be
6,700,000 shares.
<PAGE>
7. The Plan shall be amended, wherever appropriate, to:
(a) define the term "Code" to refer to the "Internal
Revenue Code of 1986, as amended"; and
(b) reflect the renumbering of Section 425 of the Code as
Section 424 thereof.
8. Section 12(a) of the Plan shall be and hereby is amended to read as
follows:
12. ADMINISTRATION
(a) The Compensation Committee of the Company's Board of
Directors shall be the Compensation Committee ("Committee") under this Plan
and shall have the power and authority granted to the Committee in this and
other paragraphs of this Plan; provided, however, that the Board shall have
the right to exercise any and all such power and authority and to perform
each and every function of the Committee whenever the Board, in its sole
discretion, deems it necessary or advisable to do so. The Committee may
designate an Administrator, who need not be a Director of the Company.
9. The amended provisions of the Plan contained above shall be set forth
in a Plan Restatement deemed to include all Plan Amendments through
and including this Amendment No. 7.
10. Except as otherwise set forth, this Amendment shall become effective
as of January 1, 1997, upon the condition that said amendment will not adversely
affect the previous rulings issued by the U.S. Treasury Department with respect
to the status of the Plan.
<PAGE>
IN WITNESS WHEREOF, the Company has caused those presents to be executed in
its name by its proper officers and its duly attested corporate seal to be
hereunto affixed pursuant to authority granted by its Board of Directors.
WALLACE COMPUTER SERVICES, INC.
BY: /s/ Robert J. Cronin
------------------------------
Its President
ATTEST:
/s/ Michael T. Laudizio
- --------------------------------
Secretary
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> APR-30-1997
<CASH> 0
<SECURITIES> 2,844
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<DEPRECIATION> (298,320)
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0
0
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<INCOME-TAX> 40,480
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<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
</TABLE>
