<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/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
-------------- --------------
Common Stock, no par value New York Stock Exchange
Preferred Share Purchase Rights Philadelphia Stock Exchange
Chicago Stock Exchange
Series AA Convertible Preferred Stock
(Depositary Shares) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
THE REGISTRANT HEREBY AMENDS ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1993 IN THE MANNER SET FORTH HEREIN.
DOCUMENTS INCORPORATED BY REFERENCE
PART III--REGISTRANT'S PROXY STATEMENT FOR THE 1994 ANNUAL MEETING OF
SHAREHOLDERS
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE>
PART I
ITEM 1. BUSINESS.
Alco Standard Corporation ("Alco") was incorporated in Ohio in 1952 and is
the successor to a business incorporated under a similar name in 1928. The term
"Alco" generally includes Alco Standard Corporation and its subsidiaries and
divisions. The address of Alco's principal executive offices is P.O. Box 834,
Valley Forge, Pennsylvania 19482 (telephone number: (215) 296-8000).
Alco markets and distributes office equipment and paper. In fiscal 1993, Alco
had annual revenues of $6.5 billion. The information concerning revenues,
income before taxes and assets attributable to each of Alco's business segments
for each of the three years in the period ended September 30, 1993 is set forth
in note 8 to the consolidated financial statements included elsewhere in this
report.
Alco was founded and continues to operate as "The Corporate Partnership."
Under this entrepreneurial principle, Alco field executives maintain a high
degree of operating autonomy, which enhances the company's ability to serve and
support its customers. The following describes Alco's two business segments.
ALCO OFFICE PRODUCTS
Alco Office Products ("AOP") sells, rents and leases photocopiers, fax
machines and other automated office equipment. AOP also provides equipment
service, supplies, and equipment leasing, and provides reprographic facilities
management and specialized document copying services.
AOP has over 550 locations throughout the United States, Canada, the United
Kingdom and Germany. These companies comprise the largest network of
independent copier and office equipment dealers in North America and in the
United Kingdom, and represent the only independent distribution network with
national scope. AOP competes against numerous competitors over a wide range of
markets, competing on the basis of price, quality of service, and product
performance.
AOP distributes the products of numerous manufacturers, including Canon,
Ricoh and Sharp, throughout 45 states, four Canadian provinces and in Europe.
Customers include large and small businesses, professional firms and government
agencies.
During fiscal 1991, 1992 and 1993, AOP accounted for approximately 23%, 26%
and 25%, respectively, of Alco's consolidated revenues, and 41%, 47% and 50%,
respectively, of Alco's operating income (excluding Unisource restructuring
costs).
In June 1993, AOP acquired Erskine House Group, PLC ("Erskine House"), a
leading U.K.-based office products company. With approximately $320 million in
annual revenues, Erskine House has dealer networks in the United States, the
United Kingdom, and Germany. In the first quarter, AOP also acquired a 49.9%
equity interest in IMM Office Systems Holding Gmbh ("IMM"), Europe's largest
independent distributor of office equipment. In addition, Alco Office Products
bought 19 independent dealerships in the United States and Canada during fiscal
1993.
UNISOURCE
Unisource Worldwide, Inc. ("Unisource") markets and distributes papers for
office and reprographic use, distributes quality printing papers, and
distributes paper and plastic packaging supply items for food retailers and
food processors. Unisource also distributes commercial sanitary and maintenance
products and industrial packaging equipment, closure systems, and supplies. The
Unisource companies were formerly known as "Paper Corporation of America," and
are currently in the process of restructuring and consolidating under the
single name "Unisource." Information concerning the restructuring is contained
on page 2 of this report.
During fiscal 1991, 1992 and 1993, Unisource accounted for approximately 77%,
74% and 75%, respectively, of Alco's consolidated revenues from continuing
operations, and 59%, 53%, and 50%, respectively, of Alco's operating income
(excluding restructuring costs).
<PAGE>
Unisource's products are distributed to commercial printers and publishers,
and to all types of manufacturers, offices, government agencies and other
institutions. Paper, printing supplies and industrial and office supply
products are also sold directly to the commercial retail market through
Unisource's Paper Plus (R) retail stores.
Unisource sells the products of substantially all major domestic and Canadian
paper manufacturers and suppliers. There has been no difficulty in obtaining
products from these suppliers. Supplier relationships are good and are expected
to continue.
Unisource's operations constitute the largest independent network of paper
distributors in the United States and Canada. Although substantial in the
aggregate, these operations compete separately in many different markets
against numerous competitors, including both independent distributors and those
owned by major paper manufacturers. Although its business is highly competitive
and its competitors numerous, Unisource believes that its competitive position
is strong. Unisource competes principally on the basis of price, quality
customer service and the range of products maintained in inventory.
Unisource has approximately 460 warehouses, distribution centers, sales
offices and other facilities located throughout the United States and Canada.
In the aggregate, Unisource occupies over 17 million square feet of space.
In July 1993, Unisource acquired Butler Paper Company ("Butler Paper") from
Georgia-Pacific Corporation. Butler Paper has annual revenues of $1 billion and
distributes printing and industrial paper throughout the United States. In
1993, Unisource also acquired Weiss Bros.-Miquon, an industrial paper
distributor based in suburban Philadelphia and Mack-Pac, a specialty packaging
company headquartered in Dallas.
INFORMATION CONCERNING ALCO'S BUSINESS IN GENERAL
RESTRUCTURING PLAN
In September 1993, the Board of Directors approved a restructuring plan for
Alco's paper distribution business and changed the name of such business from
"Paper Corporation of America" to "Unisource Worldwide, Inc." As a result of
the restructuring, a pretax charge of $175 million was recorded in the fourth
quarter.
The Unisource restructuring plan was adopted as a proactive response to
changes in the business environment in which Unisource operates. In recent
periods, mills have experienced overcapacity, resulting in depressed pricing
and pressure on distributors' margins. The usage and demand for paper has
shifted significantly because of consolidation in the commercial printing
industry, enhancements in imaging technology and the related growth in the
reprographics segment. Customers are requiring distributors to provide enhanced
services and greater capabilities.
Unisource is consolidating its facilities and changing its business
strategies in order to respond to these evolving business conditions. The
Unisource restructuring is designed to increase profitability by providing new
efficiencies and improving the quality of service to the customer.
Consolidation of warehouses and other facilities will lower Unisource's costs,
will streamline operations and will remove redundancies currently in the
system. Creation of a nationwide management information system will improve
efficiencies and allow Unisource to service national accounts effectively.
Adoption of the single name "Unisource" for all locations will create a unified
national identity which enhances customer recognition.
MANAGEMENT TRANSITION
In August 1993, the Board of Directors elected John E. Stuart as President
and Chief Executive Officer of Alco, and elected Kurt E. Dinkelacker as
Executive Vice President and Chief Financial Officer of Alco. Most recently,
Mr. Stuart served as President of Alco Office Products, and Mr. Dinkelacker
served as Executive Vice President of Alco Office Products. Ray B. Mundt will
continue in his capacity as Chairman of the Board.
2
<PAGE>
EQUITY OFFERINGS
In December 1992, Alco completed a $200 million offering of convertible
preferred stock, and used the proceeds primarily to repay indebtedness incurred
in connection with Canadian paper company acquisitions and Alco's investment in
IMM. In the first quarter of fiscal 1994, Alco intends to make a public
offering of 5 million common shares; the proceeds will be used to retire debt
incurred in the acquisitions of Butler Paper and Erskine House.
DIVESTITURES
In October 1992, Alco announced its decision to sell Alco Diversified
Services ("ADS"), a segment comprised primarily of aviation and industrial
services companies, in order to focus corporate financial resources on its core
distribution businesses. Alco has accordingly accounted for these companies as
discontinued operations. On July 22, 1993, Alco completed the sale of ADS to an
investor group which included its management.
SUPPLIERS AND CUSTOMERS
Products distributed by Alco are purchased from numerous domestic and
overseas suppliers. There has been no significant difficulty in obtaining
products from these suppliers. No industry segment of Alco is dependent upon a
single customer, or a few customers, the loss of any one or more of which would
have a material adverse effect on Alco's business taken as a whole.
Backlog is not significant because virtually all of Alco's revenues during
the last two fiscal years were derived from its distribution operations which
fill orders shortly after receipt from customers. There is no material seasonal
fluctuation in Alco's business as a whole.
Many of Alco's operations are required to carry significant amounts of
inventory to meet rapid delivery requirements of customers. At September 30,
1993, inventories accounted for approximately 38% of Alco's total current
assets.
PROPRIETARY MATTERS
Alco has a number of patents, licenses and trademarks. Alco does not believe,
however, that any patent, license or trademark is material to its operations as
a whole.
ENVIRONMENTAL REGULATION
Alco's operations are subject to numerous environmental laws which to date
have not had a material adverse effect upon Alco's capital expenditures,
earnings or competitive position. It is not possible to estimate what
expenditures may be required in order for Alco to comply with such laws in the
future, but Alco does not believe that compliance will have a material adverse
effect on it or its operations as a whole.
EMPLOYEES
At September 30, 1993, Alco had approximately 28,500 employees.
FOREIGN OPERATIONS
Alco's operations in Canada distribute paper, industrial supplies and
packaging products, and distribute and service office equipment. Alco's
European operations distribute and service office equipment. Alco also has a
49.9% equity interest in IMM, a German-based distribution network which
distributes and services office equipment. Information concerning revenues,
income before taxes and identifiable assets of Alco's foreign operations for
each of the three years in the period ended September 30, 1993 is set forth in
note 8 to the consolidated financial statements included elsewhere in this
report. Revenues from exports during the last three fiscal years were not
significant.
There are additional risks attendant to foreign operations, such as possible
currency fluctuations and unsettled political conditions.
3
<PAGE>
ITEM 2. PROPERTIES.
At September 30, 1993, Alco owned or leased numerous plants, warehouses,
offices, and sales and services facilities in 49 states, nine Canadian
provinces, the United Kingdom and Germany. These properties occupy a total of
approximately 22 million square feet of which approximately 8 million square
feet are owned and the balance are leased under lease agreements with various
expiration dates. Alco believes that none of its properties is materially
important to its operations as a whole, and believes that its facilities are
suitable and adequate for the purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS.
Alco does not believe that the outcome of lawsuits or other legal proceedings
to which it is a party will materially affect Alco or its operations as a
whole.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(No response to this item is required.)
----------------
EXECUTIVE OFFICERS OF ALCO
The following is a list of Alco's executive officers, their ages and their
positions with Alco or its subsidiaries for the last five years.
----------------
<TABLE>
<CAPTION>
NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
---- --- -------------------------------------------
<C> <C> <S>
Ray B. Mundt..................... 65 Chairman (1986); Chief Executive Officer (1980-
1993)
John E. Stuart................... 49 Chief Executive Officer and President (1993);
Vice President (1989-1993) and Group President
(1985-1993)
Kurt E. Dinkelacker.............. 40 Executive Vice President and Chief Financial
Officer (1993); Executive Vice President, Alco
Office Products (1991-1993); Vice President and
Group Controller, Alco Office Products (1989-
1991); Vice President Finance and
Administration, Alco Office Products (1988-1989)
William F. Drake, Jr. ........... 61 Vice Chairman (1984)
Hugh G. Moulton.................. 60 Executive Vice President (1992) and General
Counsel (1979); Senior Vice President--
Administration (1983-1992)
O. Gordon Brewer, Jr. ........... 56 Vice President--Finance (1986)
Kathleen M. Burns................ 41 Treasurer (1989); Assistant Treasurer (1987-1989)
J. Kenneth Croney................ 51 Vice President--Law and Secretary (1983)
Raymond A. Peterson.............. 59 Vice President (1991); President--Unisource
Corporation (1985-1991)
James E. Head.................... 48 Vice President (1993); President, CopyRite (an
Alco Office Products company) (1979-1993).
Michael J. Dillon................ 40 Controller (1993); Group Controller, Alco Office
Products (1991-1993); Associate Audit Director
(1991); Senior Audit Manager (1987-1991)
William M. Laughlin.............. 52 Vice President--Financial Operation Support
(1993); Vice President--Operational Audit, Alco
Office Products (1992-1993); Director--Audit
(1982-1992)
Stephen K. Deay.................. 47 Vice President--Tax (1993); Director--Taxes
(1989-1993)
</TABLE>
4
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The New York Stock Exchange is the principal market on which Alco's common
stock is traded (ticker symbol ASN). Alco's common stock is also traded on the
Philadelphia and Chicago Stock Exchanges. As of October 31, 1993, there were
approximately 13,973 holders of record of Alco's common stock. The following
table sets forth the high and low sales prices for Alco's common stock for each
quarterly period for the last two fiscal years and the frequency and amount of
dividends declared with respect to such stock during such periods:
<TABLE>
<CAPTION>
FISCAL YEAR 1993 FISCAL YEAR 1992
--------------------------- ----------------------------
COMMON COMMON
STOCK CASH STOCK CASH
PRICE DIVIDENDS PRICE DIVIDENDS
----------- PER ------------ PER
HIGH LOW COMMON SHARE HIGH LOW COMMON SHARE
---- --- ------------ ---- ---- ------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter........ 38 1/2 33 1/4 $.24 $35 $30 1/4 $.23
Second Quarter....... 45 3/4 35 3/4 .24 39 7/8 33 1/8 .23
Third Quarter........ 50 5/8 44 3/4 .24 42 5/8 36 1/2 .23
Fourth Quarter....... 49 3/8 42 1/4 .24 39 5/8 33 1/2 .23
</TABLE>
Alco currently expects to continue its policy of paying regular cash
dividends, although there can be no assurance as to future dividends because
they are dependent upon future operating results, capital requirements and
financial condition. Certain loan agreements limit the amount of consolidated
retained earnings from which Alco may pay dividends. As of September 30, 1993,
consolidated retained earnings of $387 million were free of restrictions
relating to the payment of dividends, repurchases of Company shares and other
matters.
ITEM 6. SELECTED FINANCIAL DATA.
The following table, which should be read in conjunction with the related
consolidated financial statements and notes included elsewhere in this report,
provides a summary of selected financial information concerning Alco for the
last five fiscal years:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenues................ $6,444,559 $4,925,136 $4,515,977 $4,293,430 $3,783,597
Income from Continuing
Operations............. 7,615* 104,217 76,642 64,300 81,106
Earnings (Loss) Per
Share From Continuing
Operations............. (.04)* 2.22 1.70 1.44 1.80
Cash Dividends Per Com-
mon Share.............. .96 .92 .88 .84 .76
Total Assets............ 3,348,890 2,444,761 2,020,571 1,916,485 1,623,873
Long-Term Debt.......... 891,395 697,460 463,679 421,201 288,282
Serial Preferred Stock.. 254 1,639 2,899 4,870 7,352
</TABLE>
- - --------
*Includes a pretax charge of $175 million ($112,875,000 net of taxes and $2.38
per share) for restructuring costs.
5
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The discussion of the results of operations for the three years ended
September 30, 1993 reviews the continuing operations of the Company as
contained in the consolidated statements of income.
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS--1993
Revenues and income before taxes by segment for fiscal years ended September
30, 1993 and September 30, 1992 and the percentage change for 1993 versus 1992
were:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
---------------------- ------------------------
% %
1993 1992 CHANGE 1993 1992 CHANGE
------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products.......... $1,586 $1,259 26.0% $138.8 $105.2 31.9%
Unisource
United States................ 4,174 3,585 16.4 118.7 118.2 .4
Canada....................... 690 83 18.3 2.3
Restructuring Costs.......... (175.0)
------ ------ ---- ------ ------ -----
Total Unisource............... 4,864 3,668 32.6 (38.0) 120.5 (55.3)
------ ------ ---- ------ ------ -----
Operating..................... 6,450 4,927 30.9 100.8 225.7 (55.3)
Unconsolidated affiliate...... (2.5)
Investment gain, net.......... 6.7
Eliminations and non-
allocated.................... (5) (2) (73.7)* (59.9)*
------ ------ ---- ------ ------ -----
$6,445 $4,925 30.9 $ 24.6 $172.5 (85.7)
====== ====== ==== ====== ====== =====
</TABLE>
- - --------
*Includes interest costs and net corporate expenses.
FISCAL 1993 COMPARED TO FISCAL 1992
The Company increased revenues $1.6 billion to $6.5 billion in fiscal 1993
from $4.9 billion in fiscal 1992. Income before taxes from operations, which
includes a restructuring charge of $175 million relating to Unisource
operations, decreased from $226 million in fiscal 1992 to $101 million in
fiscal 1993. Earnings per share from continuing operations decreased from $2.22
to $(.04), including the Unisource restructuring charge of $2.38. Earnings per
share excluding the effect of the restructuring charge were $2.34.
AOP generated $327 million in increased revenues of which $17 million relates
to fiscal 1992 acquisitions and $100 million to current year acquisitions. The
remaining $210 million increase reflects continued growth in all revenue areas
of AOP's base companies, but particularly in its equipment, service and
facilities management businesses. The $589 million increase in revenues from
Unisource's U.S. operations represents $161 million from its base companies and
$428 million from current and prior year acquisitions. The $607 million revenue
increase in the Unisource Canadian paper businesses is primarily attributable
to the prior year acquisitions and includes a decrease of $32 million relating
to changes in foreign currency rates.
The Company's total foreign operations including the foreign operations of
AOP and Unisource Canada generated $800 million in revenues for the fiscal year
1993 compared with $169 million for the same period of the prior fiscal year.
The increase is primarily the result of the Canadian paper distribution
acquisitions made in September 1992 and reflects a $48 million negative impact
because of foreign currency rate changes.
AOP's operating income increase of $33.6 million includes $1.7 million from
fiscal 1992 acquisitions and $2.7 million from current year acquisitions. The
remaining $29.2 million increase from its base companies is primarily the
result of higher operating contributions from the service and supply areas of
AOP's businesses. Unisource's U.S. paper operations include an increase in
operating income of $.5 million, reflecting $10.2 million contributed by
current and prior year acquisitions, offset by a decrease in earnings of $9.7
million from base paper distribution companies caused by competitive business
conditions in the paper industry. Unisource's Canadian paper operations include
a $16 million increase in operating income primarily relating to fiscal 1992
acquisitions. The overall decrease in operating income for Unisource is
primarily attributed to the $175 million of restructuring costs, $171.5 million
relating to U.S. operations and $3.5 million relating to Canadian operations.
6
<PAGE>
In September 1993, the Company adopted the Unisource restructuring plan as a
proactive response to changes in the business environment in which Unisource
operates. In recent periods, mills have experienced overcapacity, resulting in
depressed pricing and pressure on distributor's margins. The usage and demand
for paper has shifted significantly because of consolidation in the commercial
printing industry, enhancements in imaging technology and the related growth in
reprographics segment.
The restructuring plan encompasses the following: adoption of the "Unisource"
identity, installation of a customer-focused information system, re-engineering
of warehouse and transportation management functions, regionalization of
management and administrative support functions and consolidation of service
center locations. In connection with certain elements of the restructuring
plan, the Company recorded a charge to earnings of $175 million ($112.9 million
net of taxes or $2.38 per share) in the fourth quarter of fiscal 1993. The
major components of the restructuring costs relate to location consolidation
($60.7 million), severance costs ($48.0 million) and related information system
redesign ($22.0 million). Included in the charge are non-cash asset writedowns
relating to inventory and equipment that approximate $22.5 million, and are
directly attributable to the Unisource restructuring. The restructuring charge
will be funded from Unisource's cash flow. The Company's objective in adopting
the restructuring plan is to increase Unisource's operating return on sales
from 2.6% in the fourth quarter of fiscal 1993 to 4% by the end of fiscal 1996.
Income from foreign operations was $27.3 million for the year ended September
30, 1993. This represents an increase of $13.5 million over the prior year
results of $13.8 million and is primarily attributable to the Canadian paper
distribution acquisitions in September, 1992. Fluctuations in the foreign
currency rates reduced the increase by $1.9 million. The Company recorded a
$2.5 million loss from an unconsolidated affiliate, IMM Office Systems GmbH,
due to recessionary conditions and costs associated with an increase in sales
force.
Interest expense increased $8.5 million from the comparable period in fiscal
1992, a result of higher borrowing levels to fund acquisitions. Income before
taxes from continuing operations decreased by $147.9 million, which reflects
the $175 million restructuring charge in fiscal 1993. Income before taxes from
continuing operations also includes the combined result of improved operations
from base companies along with earnings contributed by key acquisitions made in
the prior year, which were achieved despite the increase in interest cost and
the $6.7 million net investment gain from the prior year. The effective income
tax rate for the current period is 69.0%. The effective tax rate, excluding the
restructuring costs, is 39.6%, the same as the effective rate for the year
ended September 30, 1992.
RESULTS OF OPERATIONS--1992
Revenues and income before taxes by segment for fiscal years ended September
30, 1992 and September 30, 1991 and the percentage change for 1992 versus 1991
were:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
---------------------- ------------------------
% %
1992 1991 CHANGE 1992 1991 CHANGE
------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products.... $1,259 $1,047 20.3% $105.2 $ 79.6 32.2%
Unisource
United States.......... 3,585 3,441 4.2 118.2 113.8 3.9
Canada................. 83 36 2.3 1.9
------ ------ ---- ------ ------ ----
Total Unisource....... 3,668 3,477 5.5 120.5 115.7 4.1
------ ------ ---- ------ ------ ----
Operating............... 4,927 4,524 8.9 225.7 195.3 15.6
Investment gain, net....
Unusual charges (AOP)... 6.7
Eliminations and non-al-
located................ (2) (8) (59.9)* (69.5)*
------ ------ ---- ------ ------ ----
$4,925 $4,516 9.1% $172.5 $125.8 37.1%
====== ====== ==== ====== ====== ====
</TABLE>
- - --------
*Includes interest costs and net corporate expenses.
7
<PAGE>
FISCAL 1992 COMPARED TO FISCAL 1991
AOP generated $212 million in increased revenues of which $86 million relates
to the fiscal 1992 acquisitions and $27 million relates to the fiscal 1991
acquisitions. The remaining $99 million increase represents growth in
equipment, service and supply revenues from its base companies. Unisource's
increase in revenues consists of $85 million from Unisource's base companies
and $106 million from current and prior year acquisitions, including $48
million attributable to the fine paper distribution business of Abitibi-Price,
Inc. ("Abitibi"), which was acquired on September 4, 1992. Unit sales in 1992
exceeded the prior year by an estimated 10% with lower paper prices limiting
revenue gains to 5.5%.
AOP's operating income increase of $25.6 million includes $1.8 million from
fiscal 1991 acquisitions and $4.8 million from 1992 acquisitions. AOP's
percentage growth in income continues to exceed its growth in revenues as a
result of improved service and supply margins, greater operational efficiencies
and cost controls throughout the segment coupled with additional volume through
its leasing subsidiary. Unisource's operating income increased $4.8 million
overall. Income from distribution businesses increased $3.4 million, including
$1.1 million from the acquisition of the distribution operations of Abitibi-
Price and $500,000 contributed by prior year acquisitions. The improved
earnings from Unisource's base distribution businesses resulted primarily from
additional sales volume in units during 1992. Income from converting operations
increased $1.4 million.
The Company sold all of the debentures received in the 1989 sale of its
equity interest in a former subsidiary, which resulted in a pretax gain of
approximately $8 million, and also recorded nonrecurring expenses of
approximately $1.4 million. The amounts are reported net of investment gain.
Including interest expense related to anticipated settlement of prior IRS
audit cycles, interest expense decreased by $5.7 million from the comparative
fiscal year, a result of lower interest rates and average borrowing levels. The
increase in income before taxes of 37.1% to $172.5 million is the combined
result of the changes in the Company's business previously discussed. The
effective income tax rate was 39.6% in 1992 compared with 39.1% in 1991.
Weighted average shares were approximately 1.8 million shares more than the
45.1 million shares during 1991, primarily the result of two acquisitions
treated as poolings-of-interests.
FINANCIAL CONDITION AND LIQUIDITY
Debt excluding finance subsidiaries was $794 million at September 30, 1993,
an increase of $312 million over the Company's debt balance at September 30,
1992 of $482 million. This increase was primarily due to debt-financed
acquisitions made during fiscal 1993. The Company had a total of $610 million
in bank credit commitments as of September 30, 1993, of which $147 million were
unused and available. Debt as a percentage of capitalization was 43.2% and the
current ratio was 1.5 to 1 at September 30, 1993. Finance subsidiaries debt
growth has been consistent with the growth in the lease portfolio.
In December 1992, the Company sold approximately $201 million in Series AA
convertible preferred stock and received net proceeds of $196 million. In July
1992, Alco sold Alco Diversified Services, a discontinued business, and
received net proceeds of approximately $70 million. The net proceeds of these
two transactions were applied to the repayment of debt incurred to finance
prior acquisitions.
The Company expects to sell 5 million shares of common stock in an offering
in fiscal 1994 and will apply the net proceeds to the repayment of debt. At the
end of fiscal 1993, the Company's commitments for capital expenditures were
approximately $24 million, all of which is expected to be expended during
fiscal 1994. 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 and acquisitions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Alco and its subsidiaries are
submitted herewith on pages F-1 through F-20 of this report.
8
<PAGE>
The following table, which should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations (Item
7), sets forth, by quarter, certain unaudited data concerning Alco for the last
two fiscal years (in millions, except per share data).
<TABLE>
<CAPTION>
FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL
------------- -------------- ------------- -------------- --------
<S> <C> <C> <C> <C> <C>
1993
Revenues................ $1,444.5 $1,490.6 $1,547.1 $1,962.4 $6,444.6
Gross Profit............ 364.2 382.1 389.2 485.6 1,621.1
Income (loss) before
taxes.................. 40.9 48.5 50.8 (115.6)* 24.6*
Income (loss)
Continuing operations. $ 24.8 $ 29.5 $ 30.7 $ (77.4)* $ 7.6*
Discontinued opera-
tions**.............. 1.2 2.0 (10.7) (7.5)
-------- -------- -------- -------- --------
Net income (loss)....... $ 26.0 $ 31.5 $ 30.7 $ (88.1)* $ 0.1*
-------- -------- -------- -------- --------
Earnings (loss) per
share
Continuing operations. $ .52 $ .57 $ .58 $ (1.71) $ (0.04)
Discontinued opera-
tions**.............. .03 .04 (.23) (.16)
1992
Revenues................ $1,152.2 $1,188.1 $1,240.7 $1,344.1 $4,925.1
Gross Profit............ 286.1 298.2 339.5 343.3 1,267.1
Income before taxes..... 33.0 39.2 46.4 53.9 172.5
Income (loss)
Continuing operations. 19.8 23.3 28.7 32.4 104.2
Discontinued opera-
tions**.............. 1.9 2.5 2.2 (15.0) (8.4)
-------- -------- -------- -------- --------
Net income.............. $ 21.7 $ 25.8 $ 30.9 $ 17.4 $ 95.8
======== ======== ======== ======== ========
Earnings (loss) per
share
Continuing operations. $ .43 $ .52 $ .58 $ .69 $ 2.22
Discontinued opera-
tions**.............. .04 .05 .05 (.32) (.18)
</TABLE>
- - --------
*Includes a pretax charge of $175 million for restructuring costs or $2.38 per
share.
** The Company recorded an additional pretax charge of $9.8 million or $.10 per
share in 1993 for the loss on divestiture of ADS, in addition to the $15.3
million charge or $.33 per share recorded in the fourth quarter of 1992.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
(No response to this item is required)
----------------
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors appearing in Alco's Notice of Annual Meeting
of Shareholders and Proxy Statement for the February 17, 1994 annual meeting of
shareholders (the "1994 Proxy Statement") is incorporated herein by reference.
Information regarding executive officers is set forth in Part I of this report
and is incorporated herein by reference to the 1994 Proxy Statement.
9
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Information appearing under "Executive Compensation" in the 1994 Proxy
Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management appearing under "Security Ownership" in the 1994 Proxy Statement is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information appearing under "Certain Transactions" in the 1994 Proxy
Statement is incorporated herein by reference.
----------------
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) and (2) List of Financial Statements and Schedules.
The response to this portion of Item 14 is submitted on page F-1 hereof as a
separate section of this report.
(a) (3) List of Exhibits.*
The following exhibits are filed as a part of this report (listed by numbers
corresponding to the Exhibit Table of Item 601 in Regulation S-K):
<TABLE>
<C> <S>
3.1 Amended Articles of Incorporation of Alco Standard Corporation,
filed as Exhibit 3.1 to Alco's 1991 Form 10-K, are incorporated
herein by reference.
3.2 Code of Regulations of Alco Standard Corporation, as amended
February 9, 1982, filed as Exhibit 3(b) to Alco's 1982 Form 10-K, is
incorporated herein by reference.
4.1 1993 Credit Agreement, dated as of September 30, 1993, among Alco
Standard Corporation, Alco Office Products (U.K.) and various
institutional lenders, filed as Exhibit 4.1 to Alco's 1993 Form 10-
K, is incorporated herein by reference.
4.2 Revolving Credit and Acceptance Agreement, dated as of April 21,
1993, among Alco Standard Corporation, Unisource Canada Inc. and The
Toronto Dominion Bank, filed as Exhibit 4.2 to Alco's 1993 Form 10-
K, is incorporated herein by reference.
4.3 Credit Agreement dated October 15, 1992 among Alco Standard
Corporation and various lending institutions, filed as Exhibit 4.3
to Alco's 1992 10-K, is incorporated herein by reference.
4.4 Receivables Purchase Agreement and Guarantee between PCA Paper
Acquisition Inc., Stars Trust, Alco Standard Corporation and Bank of
Montreal, filed as Exhibit 4.4 to Alco's 1992 10-K, is incorporated
herein by reference.
4.5 Rights Agreement dated as of February 10, 1988 between Alco Standard
Corporation and National City Bank, filed on February 11, 1988 as
Exhibit 1 to Alco's Registration Statement on Form 8-A, is
incorporated herein by reference.
4.6 Pursuant to Regulation S-K item 601(b)(iii), Alco Standard
Corporation agrees to furnish to the Commission, upon request, a
copy of other instruments defining the rights of holders of long-
term debt of Alco Standard Corporation and its subsidiaries.
10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco
Standard Corporation and certain Institutional Investors, filed as
Exhibit 4.2 to Alco's Current Report, dated July 1, 1988, on Form 8-
K, is incorporated herein by reference.
10.2 Long Term Incentive Plan, filed as Exhibit 10.2 to Alco's 1992 Form
10-K, is incorporated herein by reference.
</TABLE>
10
<PAGE>
<TABLE>
<C> <S>
10.3 1989 Directors' Stock Option Plan, filed as Exhibit 10.3 to Alco's
1992 Form 10-K, is incorporated herein by reference.
10.4 Partners' Stock Purchase Plan, filed as Exhibit 10.4 to Alco's 1992
Form 10-K, is incorporated herein by reference.
10.5 1981 Stock Option Plan, filed as Exhibit 10.5 to Alco's 1992 Form
10-K, is incorporated herein by reference.
10.6 1986 Stock Option Plan, filed as Exhibit 10.6 to Alco's 1993 Form
10-K, is incorporated herein by reference.
10.7 1993 Directors' Stock Option Plan, filed as Exhibit 10.7 to Alco's
1993 Form 10-K, is incorporated herein by reference.
10.8 1980 Deferred Compensation Plan, filed as Exhibit 10.7 to Alco's
1992 Form 10-K, is incorporated herein by reference.
10.9 1985 Deferred Compensation Plan, filed as Exhibit 10.8 to Alco's
1992 Form 10-K, is incorporated herein by reference.
10.10 1991 Deferred Compensation Plan, filed as Exhibit 10.9 to Alco's
1992 Form 10-K, is incorporated herein by reference.
10.11 Retirement Plan for Non-Employee Directors, filed as Exhibit 10.10
to Alco's 1992 Form 10-K, is incorporated herein by reference.
10.12 Indenture, dated as of April 1, 1986 between Alco Standard
Corporation and the Chase Manhattan Bank, N.A., as Trustee, filed
as Exhibit 4.1 to Alco Standard Corporation's Registration
Statement No. 30-4829, is incorporated herein by reference.
10.13 Share Purchase and Transfer Agreement between IMM Industria
Beteiligungs GmbH and Alco Standard Corporation, filed as Exhibit
10.12 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.14 Offering Document dated May 14, 1993 Entitled "Recommended Cash
Offers for Erskine House Group", filed as Exhibit 10.14 to Alco's
1993 Form 10-K, is incorporated herein by reference.
10.15 Agreement re: Purchase and Sale of Assets among Alco Standard
Corporation, Georgia-Pacific Corporation and Butler Paper Company,
filed as Exhibit 10.15 to Alco's 1993 Form 10-K, is incorporated
herein by reference.
11 Statement re: Computation of earnings per share, filed as Exhibit
11 to Alco's 1993 Form 10-K, is incorporated herein by reference.
12.1 Ratio of Earnings to Fixed Charges, filed as Exhibit 12.1 to Alco's
1993 Form 10-K, is incorporated herein by reference.
12.2 Ratio of Earnings to Fixed Charges Excluding Captive Finance
Subsidiaries, filed as Exhibit 12.2 to Alco's 1993 Form 10-K, is
incorporated herein by reference.
12.3 Ratio of Earnings to Fixed Charges and Preferred Stock Dividends,
filed as Exhibit 12.3 to Alco's 1993 Form 10-K, is incorporated
herein by reference.
12.4 Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
Excluding Captive Finance Subsidiaries, filed as Exhibit 12.4 to
Alco's 1993 Form 10-K, is incorporated herein by reference.
21 Subsidiaries of Alco Standard Corporation, filed as Exhibit 21 to
Alco's 1993 Form 10-K, is incorporated herein by reference.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of Attorney.
</TABLE>
- - --------
* Copies of the exhibits will be furnished to any security holder of Alco upon
payment of the reasonable cost of reproduction.
11
<PAGE>
(b) Reports on Form 8-K.
On July 6, 1993, Alco filed a Current Report on Form 8-K to report the July
1, 1993 acquisition of Butler Paper Company. On September 29, 1993, Alco filed
a Current Report on Form 8-K to report the restructuring and name change of its
paper distribution business.
(c) The response to this portion of Item 14 is submitted in response to Item
14(a)(3) above.
(d) The response to this portion of Item 14 is contained on pages S-2, S-8
and S-9 of this report.
12
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
ANNUAL REPORT ON FORM 10-K
ITEMS 14(A)(1) AND (2) AND 14(D)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS: The following consolidated financial statements of Alco
Standard Corporation and its subsidiaries are included in Item 8 of Part II of
this report:
Consolidated Statements of Income
--Fiscal years ended September 30, 1993, September 30, 1992 and
September 30, 1991
Consolidated Balance Sheets
--September 30, 1993 and September 30, 1992
Consolidated Statements of Cash Flows
--Fiscal years ended September 30, 1993, September 30, 1992 and
September 30, 1991
Consolidated Statements of Changes in Shareholders' Equity
--Fiscal years ended September 30, 1993, September 30, 1992 and
September 30, 1991
Notes to Consolidated Financial Statements
FINANCIAL STATEMENT SCHEDULES: The following consolidated financial statement
schedules of Alco Standard Corporation and its subsidiaries are submitted in
response to Item 14(d):
Schedule II--Amounts Receivable From Related Parties and
Underwriters, Promoters and Employees Other Than
Related Parties.
Schedule VIII--Valuation and Qualifying Accounts.
Schedule IX--Short-term Borrowings.
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable and, therefore, have been omitted.
F-1
<PAGE>
(ART)
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Alco Standard Corporation
We have audited the accompanying consolidated balance sheets of Alco Standard
Corporation and subsidiaries as of September 30, 1993 and 1992, and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended September 30, 1993. Our
audits also included the financial statement schedules listed in the Index at
Item 14(a). These financial statements and schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
schedules. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement and schedule presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Alco Standard Corporation and subsidiaries at September 30, 1993 and 1992,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended September 30, 1993, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
November 1, 1993
F-2
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FISCAL YEAR ENDED SEPTEMBER 30
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Net sales................................. $6,387,078 $4,882,908 $4,481,324
Dividends, interest and other income...... 6,332 3,292 6,088
Finance subsidiaries (note 12)............ 51,149 38,936 28,565
---------- ---------- ----------
6,444,559 4,925,136 4,515,977
---------- ---------- ----------
COSTS AND EXPENSES
Cost of goods sold........................ 4,799,757 3,638,494 3,390,246
Selling and administrative................ 1,378,814 1,069,602 946,756
Restructuring costs (note 14)............. 175,000
Interest.................................. 40,189 31,680 37,426
Finance subsidiaries interest (note 12)... 23,662 19,523 15,747
---------- ---------- ----------
6,417,422 4,759,299 4,390,175
---------- ---------- ----------
Loss from Unconsolidated Affiliate (note 3). (2,538)
Investment Gain, net (note 10).............. 6,683
---------- ---------- ----------
Income from Continuing Operations Before
Taxes...................................... 24,599 172,520 125,802
Taxes on Income (note 6).................... 16,984 68,303 49,160
---------- ---------- ----------
Income from Continuing Operations........... 7,615 104,217 76,642
Income (Loss) from Discontinued Operations,
net of income taxes (note 2)............... (7,515) (8,455) 40,939
---------- ---------- ----------
Net Income.................................. 100 95,762 117,581
Preferred Dividends (note 5)................ 9,571
---------- ---------- ----------
Net Income (Loss) Available to Common
Shareholders............................... $ (9,471) $ 95,762 $117,581
========== ========== ==========
Earnings (Loss) Per Share (note 1)..........
Continuing operations..................... $ (.04) $ 2.22 $ 1.70
Discontinued operations................... (.16) (.18) .91
---------- ---------- ----------
$ (.20) $ 2.04 $ 2.61
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS 1993 1992
- - ------ ---------- ----------
<S> <C> <C>
Current Assets
Cash................................................... $ 36,495 $ 24,386
Accounts receivable, less allowance for doubtful
accounts:
1993--$27,528; 1992--$23,947......................... 855,666 659,223
Inventories (note 1)................................... 591,964 460,205
Prepaid expenses, deposits and deferred taxes.......... 92,600 39,722
---------- ----------
Total current assets................................. 1,576,725 1,183,536
---------- ----------
Investment in Unconsolidated Affiliate (note 3).......... 118,060
Other Investments and Long-Term Receivables.............. 46,813 17,479
Property and Equipment, at cost
Land................................................... 23,959 28,886
Buildings and improvements............................. 226,256 178,369
Machinery and equipment................................ 346,686 337,774
---------- ----------
596,901 545,029
Less accumulated depreciation.......................... 260,551 250,605
---------- ----------
336,350 294,424
---------- ----------
Other Assets
Excess of cost of acquired companies over equity....... 694,757 506,969
Miscellaneous.......................................... 69,662 55,774
Deferred taxes......................................... 22,454
---------- ----------
786,873 562,743
---------- ----------
Finance Subsidiaries Assets (note 12).................... 484,069 386,579
---------- ----------
$3,348,890 $2,444,761
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1993 1992
- - ------------------------------------ ---------- ----------
<S> <C> <C>
Current Liabilities
Current portion of long-term debt.................... $ 39,915 $ 8,170
Notes payable (note 4)............................... 164,249 1,565
Trade accounts payable............................... 426,971 355,667
Accrued salaries, wages and commissions.............. 80,097 72,966
Deferred revenues.................................... 116,631 94,874
Other accrued expenses............................... 192,311 154,257
---------- ----------
Total current liabilities.......................... 1,020,174 687,499
---------- ----------
Long-Term Debt (note 4)................................ 590,154 471,951
Deferred Taxes and Other Liabilities
Income taxes......................................... 28,035
Restructuring costs (note 14)........................ 142,459
Workers' compensation and other (note 5)............. 113,069 73,200
---------- ----------
255,528 101,235
---------- ----------
Finance Subsidiaries Liabilities (note 12)............. 437,418 323,713
Redeemable Preferred Stock of Subsidiary (note 13)..... 25,000
Shareholders' Equity (note 5)
Series AA convertible preferred stock, no par value;
4,025,000 depositary shares issued and outstanding.. 197,900
Common stock, no par value; authorized 75,000,000
shares; issued 48,772,000 shares.................... 259,031 257,069
Retained earnings.................................... 651,373 699,015
Foreign currency translation adjustment.............. (23,640) (6,622)
Cost of common shares in treasury: 1993--1,808,000
shares;
1992--2,823,000 shares.............................. (64,048) (89,099)
---------- ----------
1,020,616 860,363
---------- ----------
$3,348,890 $2,444,761
========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEAR ENDED SEPTEMBER 30
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income...................................... $ 100 $ 95,762 $117,581
Additions (deductions) to reconcile net income
to net cash provided by operating activities
Depreciation................................... 57,272 47,510 52,048
Amortization................................... 22,137 16,628 16,501
Provision for losses on accounts receivable.... 19,702 14,636 20,078
Provision (benefit) for deferred income taxes.. (55,042) 10,243 (15,605)
Change in deferred liabilities................. 15,232 1,198 10,187
Restructuring costs accrued.................... 169,939
Loss (gain) on sale of
Alco Diversified Services.................... 9,841 15,294
Alco Food Systems............................ (5,669) (74,046)
Investment and other......................... (6,683)
Changes in operating assets and liabilities,
net of effects from acquisitions and
divestitures
Decrease (increase) in
Accounts receivable........................ (72,064) (48,870) 2,963
Inventories................................ (52,877) (28,954) 5,120
Prepaid expenses........................... (5,083) (3,225) 8,991
Increase (decrease) in accounts payable,
deferred revenues, and accrued expenses..... (52,563) 44,254 (58,700)
Miscellaneous.................................. (13,267) (10,880) 2,141
-------- -------- --------
Net cash provided............................... 43,327 141,244 87,259
-------- -------- --------
INVESTING ACTIVITIES
Proceeds from sale (net of cash retained) of
Alco Diversified Services...................... 69,836
Alco Food Systems.............................. 7,756 185,315
Investment and other........................... 15,881
Proceeds from sale of property and equipment.... 21,769 8,123 22,011
Payments received on long-term receivables...... 5,369 2,740 10,556
Cost of companies acquired, net of cash
acquired....................................... (439,447) (330,635) (94,097)
Expenditures for property and equipment......... (83,789) (58,076) (55,285)
Purchases of miscellaneous assets............... (10,702) (26,339) (7,881)
Finance subsidiaries receivables
Additions...................................... (278,503) (228,951) (172,406)
Collections.................................... 166,274 126,493 78,876
-------- -------- --------
Net cash used................................... (549,193) (483,008) (32,911)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from
Issuance of long-term debt..................... 319,338 191,898 159,423
Option exercises and sale of treasury shares... 62,284 47,096 41,929
Issuance of Series AA convertible preferred
stock, net.................................... 196,335
Short-term borrowings, net..................... 163,563
Proceeds (repayments) of accounts receivable
sold........................................... (3,440) 52,124
Long-term debt repayments....................... (241,827) (26,148) (140,322)
Finance subsidiaries debt
Issuance....................................... 228,307 127,843 108,724
Repayments..................................... (124,201) (48,000) (47,642)
Dividends paid.................................. (49,995) (41,582) (43,041)
Purchase of treasury shares..................... (32,389) (57,200) (44,731)
-------- -------- --------
Net cash provided............................... 517,975 246,031 34,340
-------- -------- --------
Net Increase (decrease) in Cash................. 12,109 (95,733) 88,688
Cash at Beginning of Year....................... 24,386 120,119 31,431
-------- -------- --------
Cash at End of Year............................. $ 36,495 $ 24,386 $120,119
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FISCAL YEAR ENDED SEPTEMBER 30
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1993 1993 1992 1992 1991 1991
------ -------- ------ --------- ------ ---------
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
------ -------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
SERIES AA CONVERTIBLE
PREFERRED STOCK
Issued in public
offering............... 4,025 $196,335
Dividend accretion...... 1,565
------ --------
Balance, end of year.... 4,025 $197,900
====== ========
COMMON STOCK
Balance, beginning of
year................... 48,772 $257,069 48,772 $ 249,870 52,046 $ 262,294
Mergers and
acquisitions........... 5,854 (3,300) (13,668)
Conversions of preferred
stock.................. 26 543
Tax benefit relating to
stock plans............ 1,962 1,345 701
------ -------- ------ --------- ------ ---------
Balance, end of year.... 48,772 $259,031 48,772 $ 257,069 48,772 $ 249,870
====== ======== ====== ========= ====== =========
RETAINED EARNINGS
Balance, beginning of
year................... $699,015 $ 687,892 $ 701,007
Net income.............. 100 95,762 117,581
Cash dividends declared:
Preferred stock: per
share 1993--$2.236... (9,571)
Common stock: per
share 1993--$.96;
1992--$.92; 1991--
$.88 (44,858) (41,520) (37,251)
Pooled companies,
prior to merger...... (3,907) (5,680)
Credits (charges) from
issuance of
treasury shares and
other.................. 6,687 (39,212) (87,765)
-------- --------- ---------
Balance, end of year.... $651,373 $ 699,015 $ 687,892
======== ========= =========
FOREIGN CURRENCY
TRANSLATION ADJUSTMENT
Balance, beginning of
year................... $ (6,622) $ 2,039 $ 4,623
Translation adjustment.. (17,018) (8,661) (2,584)
-------- --------- ---------
Balance, end of year.... $(23,640) $ (6,622) $ 2,039
======== ========= =========
COST OF COMMON SHARES IN
TREASURY
Balance, beginning of
year................... 2,823 $(89,099) 4,134 $(118,606) 7,859 $(219,712)
Purchases............... 756 (32,389) 1,569 (57,200) 1,396 (44,731)
Reissued for
Exercise of options... (405) 13,063 (297) 8,814 (314) 8,936
Sales to employee
stock plans.......... (1,250) 40,564 (1,114) 33,127 (1,114) 31,599
Conversion of
preferred stock...... (74) 2,407 (53) 1,551 (100) 2,833
Mergers and
acquisitions......... (42) 1,406 (1,416) 43,215 (3,593) 102,469
------ -------- ------ --------- ------ ---------
Balance, end of year.... 1,808 $(64,048) 2,823 $ (89,099) 4,134 $(118,606)
====== ======== ====== ========= ====== =========
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICIES
Consolidation
All wholly-owned subsidiaries are consolidated and intercompany transactions
have been eliminated. The investment in unconsolidated affiliate represents a
49.9% ownership interest in IMM Office Systems GmbH (IMM) accounted for by the
equity method.
Revenue Recognition
Revenues are recorded at the time of shipment of products or performance of
services. Revenues from maintenance contracts are recognized in earnings over
the term of the contract. The present values of payments due under sales-type
lease contracts are recorded as revenues and cost of goods sold is charged with
the book value of the equipment at the time of shipment. Future interest income
is deferred and recognized over the related lease term.
Inventories
Inventories are stated at the lower of cost or market and at September 30,
1993 consist of finished goods available for sale. At September 30, 1992,
inventories included $17,723,000 of raw material and $13,087,000 of work in
process of Alco Diversified Services ("ADS") which was divested in fiscal 1993
(note 2). The Company uses the LIFO method of determining cost for
approximately 60% of its inventories and the FIFO method for the balance. If
the FIFO method of accounting had been used for all inventories, these balances
would have been $38,630,000 higher at September 30, 1993 and $45,035,000 higher
at September 30, 1992.
Excess of Cost of Acquired Companies Over Equity
Substantially all of the excess of cost of acquired companies over equity is
amortized over 40 years by the straight-line method. The recoverability of the
asset is evaluated at the operating unit level by an analysis of operating
results and consideration of other significant events or changes in the
business environment. If an operating unit has current operating losses and
based upon projections there is a likelihood that such operating losses will
continue, the Company will measure impairment on the basis of undiscounted cash
flow from operations before interest.
Depreciation
Properties and equipment are depreciated over their useful lives by the
straight-line method.
Earnings Per Share
Earnings per share are based on 47,396,000 weighted average shares in 1993,
46,876,000 shares in 1992 and 45,054,000 shares in 1991, and include the
dilutive effect of common stock equivalents, principally stock options and
preferred shares.
Foreign Currency Translation
All assets and liabilities of foreign subsidiaries are translated into U.S.
dollars at fiscal year-end exchange rates. Income and expense items are
translated at average exchange rates prevailing during the fiscal year. The
resulting translation adjustments are recorded as a component of shareholders'
equity.
F-8
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
year presentation.
2. DISCONTINUED OPERATIONS
In September 1992, the Company decided to sell ADS. Accordingly, ADS results
for all years presented are reported in the accompanying statements of income
as discontinued operations. In fiscal 1992, the Company provided for an
anticipated loss on the sale of ADS of $15,294,000. In July 1993, the Company
completed the sale of ADS assets of approximately $102,000,000 to an investor
group for $84,000,000 in cash and notes. The Company recorded an additional
loss of $9,841,000, net of a LIFO layer liquidation of $3,572,000, in fiscal
1993 in connection with this sale.
The 1993 tax benefit for ADS in the table below is comprised of $1,449,000
relating to ADS operations and $4,966,000 relating to the loss on the sale of
ADS. The 1992 tax expense for ADS relates to its operating income. No tax
benefits were recorded from the anticipated loss on disposal since it consists
principally of the write-off of non-deductible cost in excess of net assets of
acquired businesses.
In fiscal 1990, the Company decided to sell Alco Food Systems ("AFS") and
began presenting AFS as discontinued operations on the statements of income at
that time. During fiscal 1991, the Company sold six of those businesses for
$201,000,000 in cash and notes. Assets of the companies sold were $155,599,000.
The remaining two AFS businesses with assets of $16,764,000 were sold in fiscal
1992 for cash, notes and preferred stock of $20,714,000.
In 1991, "Other" loss before taxes in the table below includes an $8,000,000
pretax interest charge for prior years' tax settlements relating to AFS and
other discontinued companies, together with charges related to previously
discontinued businesses. In addition, the "Other" 1991 tax benefit includes a
$2,700,000 settlement related to prior years.
The results of discontinued operations are:
<TABLE>
<CAPTION>
1993 1992 1991
FISCAL YEAR ENDED SEPTEMBER 30 (IN THOUSANDS) -------- -------- --------
<S> <C> <C> <C>
Revenues
Alco Diversified Services......................... $153,063 $222,764 $242,235
Alco Food Systems................................. 18,233 136,407
-------- -------- --------
$153,063 $240,997 $378,642
======== ======== ========
Income (loss) before taxes
Alco Diversified Services
Operating....................................... $ (3,946) $ 10,158 $ 18,400
Loss on disposal................................ (9,841) (15,294)
Alco Food Systems
Operating....................................... (5,281) 3,332
Gain on disposals............................... 5,669 74,046
Other............................................. (477) (18,905)
-------- -------- --------
(13,787) (5,225) 76,873
-------- -------- --------
Tax expense (benefit)
Alco Diversified Services......................... (6,415) 3,239 7,176
Alco Food Systems................................. 153 33,272
Other............................................. 143 (162) (4,514)
-------- -------- --------
(6,272) 3,230 35,934
-------- -------- --------
Net income (loss)
Alco Diversified Services......................... (7,372) (8,375) 11,224
Alco Food Systems................................. 235 44,106
Other............................................. (143) (315) (14,391)
-------- -------- --------
$ (7,515) $ (8,455) $ 40,939
======== ======== ========
</TABLE>
F-9
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITIONS
In October 1992, the Company purchased a 49.9% interest in IMM, a European
distributor of office products for $122,500,000 in cash, which included excess
of cost over equity of $101,540,000. The IMM share purchase agreement provides
the Company with the option of acquiring the remaining shares of IMM over a
three year option period (call option) beginning in May 1996. Conversely, the
majority shareholders of IMM may require the Company to acquire the remaining
shares of IMM during the same option period (put option). The call/put options
can be triggered from 1996 through 1998 but only if IMM meets certain operating
criteria during this period.
The minimum exercise prices for the call options are $87,616,100,
$102,933,600 and $112,124,100 for exercise during 1996, 1997 and 1998,
respectively. The minimum exercise prices for the put option are $75,362,100,
$79,957,350 and $87,616,100 for exercise during 1996, 1997 and 1998
respectively. These amounts reflect conversion into U.S. dollars at a September
30, 1993 exchange rate.
In June 1993, the Company acquired over 90% of the outstanding shares of
Erskine House Group PLC (Erskine House), a United States and European
distributor of office products, and the remaining outstanding shares were
acquired during the fourth quarter of fiscal 1993. The purchase price was
approximately $103,000,000, plus the assumption of approximately $101,000,000
of debt and redeemable preferred stock. Total assets acquired were
$264,828,000, which includes excess of cost over acquired equity of
$166,261,000.
In July 1993, the Company acquired the paper distribution businesses of
Butler Paper Company (Butler Paper) for a purchase price of $140,000,000. Total
assets acquired were $284,000,000 and excess of acquired equity over cost of
approximately $31,000,000 was allocated to fixed assets.
During fiscal 1993, 21 other acquisitions were made for an aggregate purchase
price of $47,706,000 in cash and stock. Total assets acquired were $68,878,000
including excess of cost over equity of $27,745,000. An additional $30,236,000
was paid and capitalized in 1993 relating to prior years' acquisitions.
In fiscal 1992, the Company issued 1,416,311 common shares for two
acquisitions accounted for as poolings-of-interests and their results of
operations were included from the beginning of the fiscal year. In September
1992, the Company purchased the Paper Distribution Group of Abitibi-Price
(Abitibi) for $284,000,000 in cash. Total assets acquired were $322,700,000
including excess of cost over acquired equity of $138,000,000. In September
1992, the Company entered into an agreement, which expires December 20, 1993,
to sell, without recourse, up to CN$70,000,000 (US$56,000,000 at September 30,
1992) of certain eligible accounts receivable of Abitibi. At September 30,
1993, the amount of receivables outstanding under the agreement was
CN$60,000,000 (US$45,000,000). As collections reduce previously sold interests,
new receivables will be sold up to the amount of the CN$70,000,000. The Company
made eight other acquisitions in 1992 for $38,839,000 in cash and costs
relating to prior years' acquisitions of $4,768,000 were paid and capitalized.
Total assets related to fiscal 1992 acquisitions, excluding Abitibi, were
$79,595,000 including excess cost over acquired equity of $15,948,000.
During fiscal 1991, the Company issued 3,300,001 shares of its common stock
in its merger with the Hillman companies (comprised of 18 office products
companies and a captive finance subsidiary). The amounts and disclosures below
include the companies as previously purchased by the Hillman companies. Another
merger in 1991 for 292,864 common shares was also accounted for as a pooling-
of-interests and its results of operations were included from October 1990. Ten
other acquisitions were made in fiscal 1991 for $84,247,000 in cash. Total
assets related to these fiscal 1991 acquisitions were $117,227,000 and included
excess of cost over acquired equity of $46,337,000.
All acquisitions, unless otherwise noted, are included from their dates of
acquisition.
F-10
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Had the purchase acquisitions been made at the beginning of the year prior to
their acquisition and the poolings been made on October 1, 1990, pro forma
results from continuing operations would have been:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30 1993 1992 1991
(IN THOUSANDS EXCEPT PER SHARE DATA) ---------- ---------- ----------
<S> <C> <C> <C>
Revenues..................................... $7,512,725 $7,150,600 $5,592,639
Income from continuing operations............ 7,455 108,957 82,038
Earnings (loss) per share.................... (.10) 2.08 1.77
</TABLE>
The pro forma results are on the basis that $201,250,000 of the purchase
price of 1993 and 1992 acquisitions were funded by the proceeds from issuance
of the Series AA convertible preferred stock.
The pro forma results for fiscal years 1993 and 1992 assuming the replacement
of $237,150,000 of debt financing for current year acquisitions with the
anticipated proceeds of a common stock offering (note 4) would be income from
continuing operations of $11,955,000 in fiscal 1993 and $115,707,000 in fiscal
1992; earnings per share of $0.00 in fiscal 1993 and $2.01 in fiscal 1992.
The dilution of earnings per share in fiscal 1993 is attributable to the
acquisition of Erskine House which includes a $4,647,000 write-off of Advance
Corporation Tax, which was deemed to be not recoverable in the foreseeable
future.
4. SHORT AND LONG-TERM DEBT
Short-term debt consisted of:
<TABLE>
<CAPTION>
1993 1992
SEPTEMBER 30 (IN THOUSANDS) -------- ------
<S> <C> <C>
Notes payable to banks at average interest rate of 3.9%........ $ 73,563
Commercial paper at interest rate of 3.2%...................... 90,000
Other notes payable at average interest rate: 1993--6.9%;
1992--6.2%.................................................... 686 $1,565
-------- ------
$164,249 $1,565
======== ======
</TABLE>
Long-term debt consisted of:
<TABLE>
<CAPTION>
1993 1992
SEPTEMBER 30 (IN THOUSANDS) -------- --------
<S> <C> <C>
Notes payable at average interest rate: 1993--3.9%; 1992--
5.4%........................................................ $300,000 $186,276
Bond issue at interest rate of 8 7/8% due 2001............... 150,000 150,000
Private placement debt at average interest rate of 8.1% due
1994-1998................................................... 100,000 100,000
Notes payable to insurance company at interest rate of 10.7%
due 2001.................................................... 35,000
Industrial revenue bonds at average interest rate: 1993--
8.0%; 1992--7.8%; due
1994-2001................................................... 11,787 12,177
Sundry notes, bonds and mortgages at average interest rate:
1993--7.3%; 1992--7.6% due 1993-2006........................ 6,850 7,519
Present value of capital lease obligations (gross amount:
1993--$45,784;
1992--$45,450).............................................. 26,432 24,149
-------- --------
630,069 480,121
Less current maturities...................................... 39,915 8,170
-------- --------
Long-term debt............................................... $590,154 $471,951
======== ========
</TABLE>
Long-term debt matures in fiscal years: 1994--$39,915,000; 1995--
$339,074,000; 1996--$22,963,000; 1997--$1,707,000; 1998--$51,286,000; 1999-
2006--$175,124,000 total.
F-11
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On December 18, 1991, the Company entered into a credit agreement with
fifteen banks to borrow up to $200 million. The agreement has two parts: half
is subject to termination December 18, 1995; the other half is available for
364 days subject to annual renewal for successive 364-day periods. Annual fees
of 3/16% on the three-year portion and 1/8% on the 364-day portion are charged
for these commitments. The agreement provides that loans may be made under
either domestic or Eurodollar notes at rates computed under various formulas
selected by the Company from among the domestic certificates of deposit rate,
prime rate or Eurodollar rate.
In October 1992, the Company entered into a credit agreement with six banks
to borrow up to DM180 million, or the U.S. dollar equivalent. A facility fee of
1/8% per annum is charged for this commitment which expires on January 15,
1994. Loans under this agreement may be made under a selection of prime, DM
Eurocurrency or Eurodollar rate formulas.
The Company entered into a new credit agreement on April 21, 1993, with four
banks allowing the Company to borrow up to $200 million or the Canadian dollar
equivalent. A facility fee of 1/8% per annum is charged for the $100 million
portion of the commitment expiring in April 1994, and 3/16% per annum is
charged for the $100 million portion expiring in April, 1996. Loans under the
agreement may be made under a selection of rate formulas including prime, the
Eurodollar rate in the United States or Canada, or the Canadian Bankers
Acceptance rate.
On June 8, 1993, the Company entered into another revolving credit agreement
with four banks allowing the Company to borrow up to $100 million or the Pounds
Sterling equivalent. This credit agreement carries a facility fee of 3/16% per
annum and expires in October 1995. Loans under this agreement may be made under
a selection of rate formulas including prime, the Eurodollar or Eurosterling
rates.
The total amount outstanding under the various lines of credit at September
30, 1993 was $463,563,000 of which $300,000,000 is classified as long-term debt
and is included in the 1995 maturities because the Company has the intention to
repay a portion of this amount with the proceeds of a public offering of
5 million shares of its common stock and the remainder via other alternative
long-term funding. At September 30, 1993, $146,753,000 of the combined lines
were unused and available.
The Company is in compliance with all loan agreements. The industrial revenue
bonds, capital lease obligations and mortgages are secured by property and
equipment that had a net book value of $23,308,000 at September 30, 1993. As of
September 30, 1993, consolidated retained earnings of $386,677,000 were free of
restrictions relating to the payment of dividends, repurchases of Company
shares and other matters.
Interest paid approximates the amounts in the statements of income for fiscal
years 1993 and 1992. In fiscal 1991, interest paid was $44,500,000.
5. SHAREHOLDERS' EQUITY
At September 30, 1993, the holders of redeemable serial preferred stock have
the option of converting them into 11,524 shares of common stock. The
redemption value of such preferred shares (1993--$254,000; 1992--$1,639,000) is
included in other liabilities. The Company has 2,164,974 shares of serial
preferred stock authorized at September 30, 1993.
On December 22, 1992, the Company sold 4,025,000 depositary shares, each
representing 1/100th of a share of Series AA preferred stock at $50.00 per
depositary share totaling $201,250,000, and used the net proceeds to reduce
debt. Dividends are cumulative at $2.375 per year per depositary share through
January 2, 1996 and $3.25 per depositary share per year thereafter. The
dividend is accrued on a straight line basis ($2.875 per depositary share) and
accretion for the difference between the accrued and cash dividend amounting to
$1,565,000 at September 30, 1993 has been credited to Series AA preferred
stock. This series of
F-12
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
preferred stock has one vote per share (equivalent to 1/100 vote per depositary
share) and is convertible at rate of 1.1201 shares of the Company's common
stock per depositary share at any time. The Series AA preferred stock, unless
previously converted into common stock, is redeemable by issuance of common
stock at the Company's option at the rate of 1.1201 shares of common stock per
depositary share (with certain limitations) on or after January 9, 1996 through
January 9, 2000. On or after January 9, 2000, this series of preferred stock is
redeemable at the Company's option at $50.00 per depositary share. Upon
liquidation, Series AA preferred stock has preference equivalent to $50.00 per
depositary share plus an amount equal to accrued and unpaid dividends. At
September 30, 1993, 4,508,403 shares of common stock were reserved for
conversion of the Series AA preferred stock.
Employee stock options are granted at the market price at dates of grant and
expire in ten years. The proceeds of options exercised are credited to
shareholders' equity. There are no charges or credits to income in connection
with these options. A 1989 plan for the Company's directors enables
participants to receive their annual directors' fees in the form of options to
purchase shares of common stock at a discount. The discount is equivalent to
the fee and is charged to expense.
Changes in common shares under option were:
<TABLE>
<CAPTION>
DIRECTORS EMPLOYEES
--------------------------- -----------------------------
SHARES OPTION PRICE RANGE SHARES OPTION PRICE RANGE
------- ------------------ --------- ------------------
<S> <C> <C> <C> <C>
September 30, 1990... 53,321 $19.55 to $21.47 2,033,516 $ 8.69 to $35.63
Granted............ 21,865 26.34 478,070 30.75 to 35.00
Exercised.......... (4,736) 19.55 to 21.47 (309,446) 8.69 to 32.13
Cancelled.......... (39,815) 8.69 to 35.00
------- ---------------- --------- ----------------
September 30, 1991... 70,450 19.55 to 26.34 2,162,325 9.13 to 35.63
Granted............ 18,624 28.69 432,250 31.50 to 38.25
Exercised.......... (2,391) 19.55 to 26.34 (294,908) 9.13 to 35.63
Cancelled.......... (44,070) 9.38 to 38.25
------- ---------------- --------- ----------------
September 30, 1992... 86,683 19.55 to 28.69 2,255,597 16.13 to 38.25
Granted............ 24,669 30.19 to 40.25 567,817 35.25 to 40.25
Exercised.......... (17,224) 19.55 to 26.34 (387,916) 16.13 to 38.25
Cancelled.......... (211,717) 22.88 to 40.25
------- ---------------- --------- ----------------
September 30, 1993... 94,128 19.55 to 40.25 2,223,781 16.13 to 40.25
======= ================ ========= ================
</TABLE>
At September 30, 1993, options to purchase 1,140,619 shares were exercisable
(1993: employees--1,070,710; directors--69,459; 1992: employees--919,265;
directors--68,059) and 1,263,572 shares were available for grant (1993:
employees--782,051; directors--481,521; 1992: employees--1,245,965; directors--
406,190). At September 30, 1993, 8,111,598 shares of common stock were reserved
for sales to employee stock plans.
Effective October 1, 1992 the Company issued options pursuant to the
Company's 1986 Stock Option Plan to purchase 107,814 shares of common stock in
accordance with the Company's Long-Term Incentive Compensation Plan. The
options become exercisable only to the extent that credits are issued pursuant
to the plan. The award of credits is conditional upon achieving predetermined
performance objectives during the three year period ended September 30, 1995.
The value of the awards are charged to expense over the plan period.
One preferred share purchase right (Right) exists for each outstanding share
of common stock (the Shares). The Rights become exercisable ten days after the
earlier of a public announcement by another entity
F-13
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
that it has acquired beneficial ownership of 20% or more of the Shares or a
public announcement of another entity's intention to commence a tender offer to
acquire beneficial ownership of 30% or more of the Shares.
When the Rights become exercisable, each Right will entitle a holder to
purchase 1/100th of a share of Series 12 Preferred Stock for an exercise price
of $75. If the Company consolidates or merges with another entity, or sells
assets that aggregate 50% of its consolidated assets or generates more than 50%
of its consolidated operating income or cash flow, then each Right holder will
have the right to purchase, for the exercise price, a number of shares of the
other entity having a then-current market value equal to twice the exercise
price.
If another entity owning 20% or more of the Shares (a) engages in certain
transactions with the Company, or (b) causes the Company to forego or reduce
quarterly dividends or take an action that would result in a more than 2%
increase in the other entity's proportionate share of the outstanding shares;
or if another entity becomes the beneficial owner of 30% or more of the
outstanding shares; then each Right holder (other than the other entity) will
have the right to purchase, for the exercise price, a number of shares of the
Company having a then-current market value equal to twice the exercise price.
The Rights are redeemable by the Company prior to becoming exercisable at
$.05 per Right and expire on February 10, 1998.
6. TAXES ON INCOME--CONTINUING OPERATIONS
Provision for income taxes:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED 1993 1993 1992 1992 1991 1991
SEPTEMBER 30 (IN CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
THOUSANDS) ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Federal................... $57,200 $(48,149) $45,872 $10,503 $42,218 $(5,560)
Foreign................... 6,602 (948) 5,239 6,501
State..................... 3,706 (1,427) 6,254 435 6,157 (156)
------- -------- ------- ------- ------- -------
Taxes on income........... $67,508 $(50,524) $57,365 $10,938 $54,876 $(5,716)
======= ======== ======= ======= ======= =======
</TABLE>
Deferred taxes resulting from temporary differences between financial and tax
accounting:
<TABLE>
<CAPTION>
1993 1992 1991
FISCAL YEAR ENDED SEPTEMBER 30 (IN THOUSANDS) -------- -------- --------
<S> <C> <C> <C>
Depreciation..................................... $ 4,741 $ (1,658) $ 4,656
Lease income recognition......................... 11,993 13,648 6,645
Nondeductible reserves........................... (67,115) (5,568) (12,741)
Other............................................ (143) 4,516 (4,276)
-------- -------- --------
Deferred taxes................................... $(50,524) $ 10,938 $ (5,716)
======== ======== ========
</TABLE>
The principal differences comprising the Company's deferred tax liability at
September 30, 1993 are accumulated depreciation, sales-type leasing
transactions and nondeductible reserves.
Components of the effective income tax rate:
<TABLE>
<CAPTION>
1993 1992 1991
FISCAL YEAR ENDED SEPTEMBER 30 ---- ---- ----
<S> <C> <C> <C>
Federal....................................................... 34.8% 34.0% 34.0%
State......................................................... 6.1 2.6 3.1
Goodwill...................................................... 16.1 2.0 2.4
Foreign....................................................... 8.2 1.2 1.1
Other......................................................... 3.8 (.2) (1.5)
---- ---- ----
Effective income tax rate..................................... 69.0% 39.6% 39.1%
==== ==== ====
</TABLE>
F-14
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The effective tax rate for 1993, excluding the restructuring costs, is 39.6%,
the same as the effective rate for the year ended September 30, 1992.
The Company adopted the liability method of accounting for income taxes under
SFAS No. 96 for the fiscal year ended September 30, 1988. In February 1992, the
Financial Accounting Standards Board issued SFAS No. 109, "Accounting for
Income Taxes". As required, the Company will adopt SFAS No. 109 in the first
quarter of fiscal 1994. Adoption of this statement will not have a material
effect upon the Company's consolidated financial statements.
Net income tax payments for all operations amounted to $77,487,000 in 1993,
$57,861,000 in 1992 and $92,584,000 in 1991.
7. PENSION, POSTRETIREMENT, AND STOCK PURCHASE PLANS
The Company sponsors defined benefit pension plans for the majority of its
employees. The benefits generally are based on years of service and
compensation. The Company funds at least the minimum amount required by
government regulations. The cost of these plans, together with contributions to
multi-employer and defined contribution pension plans ($5,134,000 in 1993,
$2,642,000 in 1992 and $3,502,000 in 1991), charged to continuing operations
amounted to $12,684,000 for 1993, $7,116,000 for 1992 and $6,687,000 for 1991.
The components of net periodic pension cost for the company-sponsored defined
benefit pension plans are:
<TABLE>
<CAPTION>
1993 1992 1991
FISCAL YEAR ENDED SEPTEMBER 30 (IN THOUSANDS) -------- -------- -------
<S> <C> <C> <C>
Service cost....................................... $ 11,123 $ 8,131 $ 7,519
Interest cost on projected benefit obligation...... 13,416 11,644 10,003
Actual return on plan assets....................... (34,238) (22,732) (8,031)
Net amortization and deferral...................... 17,249 6,520 (6,306)
-------- -------- -------
Net pension cost................................... $ 7,550 $ 3,563 $ 3,185
======== ======== =======
</TABLE>
Assumptions used in accounting for the company-sponsored defined benefit
pension plans were:
<TABLE>
<CAPTION>
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Weighted average discount rates............................ 7.25% 7.75% 8.25%
Rates of increase in compensation levels................... 5.75% 6.25% 6.75%
Expected long-term rate of return on assets................ 10.00% 10.00% 10.00%
</TABLE>
The funded status and amounts recognized in the consolidated balance sheets
for the company-sponsored defined benefit pension plans are:
<TABLE>
<CAPTION>
1993 1992
SEPTEMBER 30 (IN THOUSANDS) -------- --------
<S> <C> <C>
Actuarial present value of benefit obligations
Vested.................................................... $216,926 $143,014
-------- --------
Accumulated............................................... $224,431 $145,134
-------- --------
Projected................................................. $258,136 $170,883
Plan assets at fair value................................... 254,083 176,547
-------- --------
Plan assets (less than) in excess of projected benefits..... (4,053) 5,664
Items not yet recognized
Net gain.................................................. (7,445) (5,774)
Prior service cost........................................ 7,737 7,054
Net asset existing at transition date..................... (18,260) (20,101)
Adjustment required to recognize minimum liability.......... (4,902) (3,890)
-------- --------
Net pension liability....................................... $(26,923) $(17,047)
======== ========
</TABLE>
F-15
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Substantially all of the plan assets at September 30, 1993 are invested in
listed stocks, bonds and government securities including common stock of the
Company of $39,578,000.
In July 1993, the Company acquired Butler Paper and its related defined
benefit pension plans which had a combined projected benefit obligation of
$47,758,000 and combined fair value of plan assets of $41,980,000 as of
September 30, 1993.
In December 1990, the Financial Accounting Standards Board issued SFAS No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
As required, the Company will adopt SFAS No. 106 in the first quarter of fiscal
1994. This statement requires the accrual of the accumulated postretirement
benefit obligation. Upon adoption, the Company intends to elect immediate
recognition of the transition obligation which will result in a net of tax
charge of $1,560,000, or $.03 per share.
The majority of the Company's employees are also eligible to participate in
the Company's Stock Participation Plan. They may invest 2% to 6% of regular
compensation before taxes. The Company contributes an amount equal to two-
thirds of the employees' investments and all amounts are invested in the
Company's common shares. Employees vest in the Company's contributions upon the
completion of five years of service. There is a similar plan for eligible
management employees. The cost of these plans charged to continuing operations
amounted to $16,174,000 in 1993, $12,797,000 in 1992 and $9,306,000 in 1991.
8. SEGMENT REPORTING
The Company is organized into two operating segments. Alco Office Products
sells, leases, and rents photocopiers, facsimile equipment, micrographic
equipment and other automated office equipment and provides equipment service
and supplies, copying service and customer financing (through a captive leasing
company). Unisource is a distributor of printing and communications paper,
industrial paper and plastic products, and produces and distributes other
products, including carton sealing tapes, tape dispensing equipment, envelopes
and food service disposables.
Amounts for 1993, 1992 and 1991 relative to continuing operations for each
segment are presented below (in millions).
<TABLE>
<CAPTION>
DEPRECIATION
INCOME CAPITAL AND
REVENUES BEFORE TAXES ASSETS EXPENDITURES AMORTIZATION
-------- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1993
Alco Office Products.... $1,585.6 $ 138.8 $1,450.0 $55.9 $45.4
Unisource...............
United States......... 4,173.7 118.7 1,319.6 18.8 22.3
Canada................ 690.4 18.3 314.3 2.9 6.9
Restructuring costs... (175.0)
-------- ------- -------- ----- -----
Total Unisource......... 4,864.1 (38.0) 1,633.9 21.7 29.2
-------- ------- -------- ----- -----
Operating............... 6,449.7 100.8 3,083.9 77.6 74.6
Unconsolidated
affiliate.............. (2.5) 118.1
Eliminations and non-
allocated.............. (5.1) (73.7)* 146.9 1.2 1.5
-------- ------- -------- ----- -----
$6,444.6 $ 24.6 $3,348.9 $78.8 $76.1
======== ======= ======== ===== =====
</TABLE>
- - --------
*Includes interest costs and net corporate expenses.
F-16
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
DEPRECIATION
INCOME CAPITAL AND
REVENUES BEFORE TAXES ASSETS EXPENDITURES AMORTIZATION
-------- ------------ -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
1992
Alco Office Products.... $1,259.2 $105.2 $ 967.5 $33.8 $37.0
Unisource...............
United States......... 3,585.1 118.2 988.7 19.1 20.0
Canada................ 82.8 2.3 295.8 1.1 .6
-------- ------ -------- ----- -----
Total Unisource......... 3,667.9 120.5 1,284.5 20.2 20.6
-------- ------ -------- ----- -----
Operating............... 4,927.1 225.7 2,252.0 54.0 57.6
Investment gain, net.... 6.7
Eliminations and non-
allocated.............. (2.0) (59.9)* 69.2 .8 1.7
-------- ------ -------- ----- -----
$4,925.1 $172.5 $2,321.2 $54.8 $59.3
======== ====== ======== ===== =====
1991
Alco Office Products.... $1,047.1 $ 79.6 $ 781.3 $28.6 $36.3
Unisource...............
United States......... 3,441.1 113.8 897.3 16.1 18.4
Canada................ 35.8 1.9 8.2 .2 .4
-------- ------ -------- ----- -----
Total Unisource......... 3,476.9 115.7 905.5 16.3 18.8
-------- ------ -------- ----- -----
Operating............... 4,524.0 195.3 1,686.8 44.9 55.1
Eliminations and non-
allocated.............. (8.0) (69.5)* 177.8 2.5 3.1
-------- ------ -------- ----- -----
$4,516.0 $125.8 $1,864.6 $47.4 $58.2
======== ====== ======== ===== =====
</TABLE>
- - --------
*Includes interest costs and net corporate expenses.
Revenues, income before taxes and identifiable assets by geographic area from
continuing operations for the fiscal years ended September 30 are as follows:
<TABLE>
<CAPTION>
INCOME
REVENUES BEFORE TAXES ASSETS
(IN MILLIONS) ------------------ --------------- -----------------
1993 1992 1993 1992 1993 1992
-------- -------- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
Domestic................ $5,649.8 $4,758.3 $ 73.5 $211.9 $2,547.5 $1,838.3
Foreign................. 799.9 168.8 27.3 13.8 536.4 413.7
-------- -------- ------ ------ -------- --------
Operating............... 6,449.7 4,927.1 100.8 225.7 3,083.9 2,252.0
Unconsolidated
affiliate.............. (2.5) 118.1
Investment gain, net.... 6.7
Elimination and non-
allocated.............. (5.1) (2.0) (73.7)* (59.9)* 146.9 69.2
-------- -------- ------ ------ -------- --------
Total............... $6,444.6 $4,925.1 $ 24.6 $172.5 $3,348.9 $2,321.2
======== ======== ====== ====== ======== ========
</TABLE>
- - --------
*Includes interest costs and net corporate expenses.
Included in income before taxes for fiscal 1993 are restructuring costs of
$171,500,000 for domestic operations and $3,500,000 for foreign operations.
The revenue and identifiable assets of the Company's foreign businesses were
less than 5% of the consolidated amounts in fiscal year 1991. These operations
accounted for 9.3% of income before taxes from continuing operations in fiscal
year 1991.
F-17
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. LEASES--CONTINUING OPERATIONS
Equipment acquired under capital leases is included in property and equipment
in the amount of $34,583,000 in 1993 and $30,722,000 in 1992 and the related
amounts of accumulated depreciation are $15,735,000 in 1993 and $14,232,000 in
1992. Related obligations are in long-term debt and related amortization is
included in depreciation.
At September 30, 1993, future minimum payments under noncancelable operating
leases with remaining terms of more than one year were: 1994--$74,754,000;
1995--$61,821,000; 1996--$49,377,000; 1997--$39,767,000; 1998--$32,123,000;
thereafter--$91,450,000.
Total rental expense was $68,293,000 in 1993, $56,894,000 in 1992 and
$46,724,000 in 1991.
10. INVESTMENT GAIN
In fiscal 1992, the Company sold debentures received in the 1989 sale of its
equity interest in a former subsidiary which resulted in a pre tax gain of
approximately $8,100,000 and also recorded nonrecurring expenses of
approximately $1,400,000.
11. CONTINGENCIES
There were contingent liabilities for taxes, guarantees, lawsuits, and
environmental and various other matters occurring in the ordinary course of
business. On the basis of information furnished by counsel and others,
management believes that none of these contingencies will materially affect the
Company.
The Company has been advised that a former subsidiary may assert that the
Company is liable to it for certain liabilities arising under the "Coal
Industry Health Benefit Act of 1992". Based on consultations with counsel, the
Company believes that any such claim would be without merit.
12. FINANCE SUBSIDIARIES
The Company's wholly-owned finance subsidiaries are engaged in purchasing
office equipment from Company dealers and leasing the equipment to customers
under direct financing leases.
Summarized financial information of the finance subsidiaries is as follows:
<TABLE>
<CAPTION>
1993 1992
SEPTEMBER 30 (IN THOUSANDS) -------- --------
<S> <C> <C>
Future minimum lease payments receivable.................... $555,020 $427,441
Less: Unearned income....................................... (82,102) (63,975)
-------- --------
Lease receivables........................................... 472,918 363,466
Accounts receivable and other assets........................ 11,151 23,113
-------- --------
Finance subsidiaries assets................................. $484,069 $386,579
======== ========
Debt at average interest rate:
1993--6%; 1992--7.4% due 1994-1996.......................... $413,092 $300,509
Other liabilities........................................... 24,326 23,204
-------- --------
Finance subsidiary liabilities.............................. $437,418 $323,713
======== ========
</TABLE>
The finance subsidiaries results of operations included in the Company's
consolidated net income were net income of $8,180,000 in 1993, $6,055,000 in
1992 and $3,591,000 in 1991.
At September 30, 1993, future minimum payments to be received under direct
financing leases were: 1994--$218,418,000; 1995--$171,968,000; 1996--
$106,541,000; 1997--$46,135,000; 1998--$11,958,000.
F-18
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. FINANCIAL INSTRUMENTS
The Company uses financial instruments in the normal course of its business.
These financial instruments include debt, commitments to extend credit and
interest rate swap agreements. The notional or contractual amounts of these
commitments and other financial instruments are shown in the table on page F-
20.
Concentration of Credit Risk
The Company is subject to credit risk through trade receivables and short-
term cash investments. Credit risk with respect to trade receivables is
minimized because of a large customer base and its geographic dispersion.
Short-term cash investments are placed with high credit quality financial
institutions and in short duration corporate and government debt securities
funds. By policy, the Company limits the amount of credit exposure in any one
type of investment instrument.
Interest Rate Swap Agreements
The Company has entered into interest rate swap agreements to eliminate the
impact of changes in interest rates on its finance subsidiary variable rate
notes payable. At September 30, 1993, the Company had outstanding interest rate
swap agreements with commercial banks, having a total notional principal amount
of $92,000,000. Those agreements effectively change the Company's interest rate
exposure on $92,000,000 of variable rate notes due in 1994 through 1996 from
variable to fixed rates (ranging from 4.7% to 8.4%). The interest rate swap
agreements mature at the time the related notes mature. The Company is exposed
to credit loss in the event of nonperformance by the other parties to the
interest rate swap agreements. However, the Company does not anticipate
nonperformance by the counterparties.
Redeemable Preferred Stock of Subsidiary
In connection with the acquisition of Erskine House, the Company assumed
$25,000,000 of preferred stock which contains mandatory redemption provisions
from March 30, 2000 to March 30, 2005. Dividends are payable at an annual rate
of 9.14%.
The following methods and assumptions were used by the Company in estimating
fair value disclosures for financial instruments:
Cash, Short-Term Debt and Long Term Receivables
The carrying amount reported in the balance sheet approximates fair value.
Debt and Redeemable Preferred Stock of Subsidiary
The fair value of these instruments is estimated using a discounted cash flow
analysis.
Off-Balance-Sheet Instruments
Fair values for the Company's off-balance-sheet instruments (interest rate
swaps) are based on the estimated costs to terminate the agreements.
F-19
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONCLUDED)
The carrying amounts and fair values of the Company's financial instruments
at September 30, 1993 are as follows:
<TABLE>
<CAPTION>
FAIR
CARRYING AMOUNT VALUE
(IN THOUSANDS) --------------- --------
<S> <C> <C>
Long-term debt:
Notes payable to banks............................... $300,000 $300,000
Bond issue at interest rate of 8 7/8% due 2001....... 150,000 176,780
Private placement debt due 1994-1998................. 100,000 106,450
Notes payable to insurance company................... 35,000 45,215
Industrial revenue bonds due 1994-1998............... 11,787 13,638
Sundry notes, bonds and mortgages due 1993-2006...... 6,850 7,081
Finance subsidiaries debt.............................. 413,092 418,101
Redeemable preferred stock of subsidiary............... 25,000 30,313
Interest rate swaps.................................... 1,241
</TABLE>
14. RESTRUCTURING COSTS
On September 29, 1993 the Company adopted a plan to restructure its paper
distribution business including the following: installation of a customer-
focused information system, re-designing of warehouse and transportation
management functions, rationalization of management and administrative support
functions and consolidation of service center locations. In connection with
certain elements of the restructuring plan, the Company recorded a charge to
earnings of $175,000,000 ($112,875,000 net of taxes or $2.38 per share) in the
fourth quarter of fiscal 1993. The charge will provide for facility
consolidation ($60.7 million), severance costs ($48.0 million) and other costs
associated with the restructuring plan.
F-20
<PAGE>
ALCO STANDARD CORPORATION
VALLEY FORGE, PENNSYLVANIA 19482-0834
(215) 296-8000
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS FORM 10-K/A FOR THE FISCAL YEAR
ENDED SEPTEMBER 30, 1993 TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED,
THEREUNTO DULY AUTHORIZED.
Alco Standard Corporation
Date: May 5, 1994 /s/ Michael J. Dillon
By____________________________________
(MICHAEL J. DILLON) CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
FORM 10-K/A HAS BEEN SIGNED BELOW ON MAY 5, 1994 BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.
SIGNATURES TITLE
*Ray B. Mundt Chairman and Director
- - ------------------------------------
(RAY B. MUNDT)
*John E. Stuart Chief Executive Officer and
- - ------------------------------------ Director (Principal Executive
(JOHN E. STUART) Officer)
/s/ Kurt E. Dinkelacker Chief Financial Officer (Principal
- - ------------------------------------ Financial Officer)
(KURT E. DINKELACKER)
/s/ Michael J. Dillon Controller (Principal Accounting
- - ------------------------------------ Officer)
(MICHAEL J. DILLON)
*J. Mahlon Buck, Jr. Director
- - ------------------------------------
(J. MAHLON BUCK, JR.)
*Paul J. Darling Director
- - ------------------------------------
(PAUL J. DARLING)
*William F. Drake, Jr. Director
- - ------------------------------------
(WILLIAM F. DRAKE, JR.)
*James J. Forese Director
- - ------------------------------------
(JAMES J. FORESE)
*Frederick S. Hammer Director
- - ------------------------------------
(FREDERICK S. HAMMER)
*Barbara Barnes Hauptfuhrer Director
- - ------------------------------------
(BARBARA BARNES HAUPTFUHRER)
*Dana G. Mead Director
- - ------------------------------------
(DANA G. MEAD)
*Paul C. O'Neill Director
- - ------------------------------------
(PAUL C. O'NEILL)
*Rogelio G. Sada Director
- - ------------------------------------
(ROGELIO G. SADA)
*James W. Stratton Director
- - ------------------------------------
(JAMES W. STRATTON)
*By his signature set forth below, Hugh G. Moulton, pursuant to duly executed
Powers of Attorney duly filed with the Securities and Exchange Commission, has
signed this Form 10-K/A on behalf of the persons whose signatures are printed
above, in the capacities set forth opposite their respective names.
/s/ Hugh G. Moulton
- - ------------------------------------ May 5, 1994
(HUGH G. MOULTON)
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
SCHEDULE II--AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS,
PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ --------------------- --------------------------
DEDUCTIONS BALANCE AT END OF PERIOD
---------- ------------------------
BALANCE
AT
BEGINNING AMOUNTS AMOUNTS
NAME OF DEBTOR(1) OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
----------------- --------- --------- --------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
1993
- - ------------------------
Hugh G. Moulton......... $247,000 $247,000
O. Gordon Brewer, Jr.... 165,000 $115,000 50,000
Hallie H. Gibbs......... 150,000 150,000
William F. Drake, Jr.... 121,000 121,000
J. Kenneth Croney....... 115,000 115,000
Raymond A. Peterson..... 111,000 111,000
Peter Shoemaker......... $150,000 150,000
YEAR ENDED SEPTEMBER 30,
1992
- - ------------------------
Hugh G. Moulton......... $247,000 $247,000
O. Gordon Brewer, Jr.... 165,000 165,000
Hallie H. Gibbs......... 150,000 150,000
William F. Drake, Jr.... 121,000 121,000
J. Kenneth Croney....... 115,000 115,000
Raymond A. Peterson..... 111,000 111,000
YEAR ENDED SEPTEMBER 30,
1991
- - ------------------------
Hugh G. Moulton......... $247,000 $247,000
O. Gordon Brewer, Jr.... 165,000 165,000
Hallie H. Gibbs......... 150,000 150,000
William F. Drake, Jr.... 121,000 121,000
J. Kenneth Croney....... 115,000 115,000
Raymond A. Peterson..... 111,000 111,000
James J. Swearingen..... $150,000 $150,000
</TABLE>
- - --------
(1) The notes receivable are secured by the debtors' pledge of Alco stock, bear
interest at 6% and are due upon demand.
S-2
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ -------------- -----------
ADDITIONS
-------------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS DEDUCTIONS-- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ----------- ----------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30,
1993
- - ------------------------
Allowance for doubtful
accounts............... $23,947,000 $19,702,000 $4,768,000(1) $20,889,000(2) $27,528,000
=========== =========== ============= ============== ===========
YEAR ENDED SEPTEMBER 30,
1992
- - ------------------------
Allowance for doubtful
accounts............... $20,493,000 $14,636,000 $6,414,000(1) $17,596,000(2) $23,947,000
=========== =========== ============= ============== ===========
YEAR ENDED SEPTEMBER 30,
1991
- - ------------------------
Allowance for doubtful
accounts............... $15,953,000 $20,078,000 $533,000(1) $16,071,000(2) $20,493,000
=========== =========== ============= ============== ===========
</TABLE>
- - --------
(1) Represents beginning balances of acquired companies.
(2) Accounts written off during year, net of recoveries.
S-8
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDARIES
SCHEDULE IX--SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E(3) COL. F(4)
------ ------ ------ ------ --------- ---------
MAXIMUM AMOUNT WEIGHTED AVERAGE
WEIGHTED OUTSTANDING AVERAGE AMOUNT INTEREST RATE
CATEGORY OF AGGREGATE BALANCE AT AVERAGE DURING THE OUTSTANDING DURING THE
SHORT-TERM BORROWINGS END OF PERIOD INTEREST RATE PERIOD DURING THE PERIOD PERIOD
--------------------- ------------- ------------- -------------- ----------------- ----------------
YEAR ENDED SEPTEMBER 30,
1993
- - ------------------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks--
domestic(1)............ $ 1,166,000 3.3% $164,000,000 $123,999,000 3.3%
Notes payable--foreign.. 72,639,000 5.6 72,639,000 18,056,000 5.3
Notes payable--other.... 444,000 6.8 1,755,000 968,000 4.5
Commercial paper(2)..... 90,000,000 3.2 100,000,000 33,445,000 3.3
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1992
- - ------------------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks--
domestic(1)............ $ 39,000,000 $ 23,099,000 3.9%
Notes payable--foreign.. $ 241,000 6.3% 835,000 187,000 9.1
Notes payable--other.... 1,324,000 4.3 4,752,000 1,377,000 7.5
<CAPTION>
YEAR ENDED SEPTEMBER 30,
1991
- - ------------------------
<S> <C> <C> <C> <C> <C>
Notes payable to banks--
domestic(1)............ $212,124,000 $ 95,927,000 7.2%
Notes payable--foreign.. $ 528,000 9.5% 1,296,000 242,000 10.3
Notes payable--other.... 896,000 7.7 1,935,000 1,196,000 9.0
</TABLE>
- - --------
(1) Notes payable to banks represent borrowings under uncommitted but confirmed
lines of credit that are supported by bank credit agreements (See note 4 to
the consolidated financial statements).
(2) Commercial paper matures generally 30 days from date of issue.
(3) The average amount outstanding during the period was computed by dividing
the sum of the daily principal balances by 365.
(4) The weighted average interest rate during the period was computed by
dividing the actual interest expense by the average short-term debt
outstanding.
S-9
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<C> <S>
3.1 Amended Articles of Incorporation of Alco Standard Corporation,
filed as Exhibit 3.1 to Alco's 1991 Form 10-K, are incorporated
herein by reference.
3.2 Code of Regulations of Alco Standard Corporation, as amended
February 9, 1982, filed as Exhibit 3(b) to Alco's 1982 Form 10-K, is
incorporated herein by reference.
4.1 1993 Credit Agreement, dated as of September 30, 1993, among Alco
Standard Corporation, Alco Office Products (U.K.) and various
institutional lenders, filed as Exhibit 4.1 to Alco's 1993 Form 10-
K, is incorporated herein by reference.
4.2 Revolving Credit and Acceptance Agreement, dated as of April 21,
1993, among Alco Standard Corporation, Unisource Canada Inc. and The
Toronto Dominion Bank, filed as Exhibit 4.2 to Alco's 1993 Form 10-
K, is incorporated herein by reference.
4.3 Credit Agreement dated October 15, 1992 among Alco Standard
Corporation and various lending institutions, filed as Exhibit 4.3
to Alco's 1992 10-K, is incorporated herein by reference.
4.4 Receivables Purchase Agreement and Guarantee between PCA Paper
Acquisition Inc., Stars Trust, Alco Standard Corporation and Bank of
Montreal, filed as Exhibit 4.4 to Alco's 1992 10-K, is incorporated
herein by reference.
4.5 Rights Agreement dated as of February 10, 1988 between Alco Standard
Corporation and National City Bank, filed on February 11, 1988 as
Exhibit 1 to Alco's Registration Statement on Form 8-A, is
incorporated herein by reference.
4.6 Pursuant to Regulation S-K item 601(b)(iii), Alco Standard
Corporation agrees to furnish to the Commission, upon request, a
copy of other instruments defining the rights of holders of long-
term debt of Alco Standard Corporation and its subsidiaries.
10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco
Standard Corporation and certain Institutional Investors, filed as
Exhibit 4.2 to Alco's Current Report, dated July 1, 1988, on Form 8-
K, is incorporated herein by reference.
10.2 Long Term Incentive Plan, filed as Exhibit 10.2 to Alco's 1992 Form
10-K, is incorporated herein by reference.
10.3 1989 Directors' Stock Option Plan, filed as Exhibit 10.3 to Alco's
1992 Form 10-K, is incorporated herein by reference.
10.4 Partners' Stock Purchase Plan, filed as Exhibit 10.4 to Alco's 1992
Form 10-K, is incorporated herein by reference.
10.5 1981 Stock Option Plan, filed as Exhibit 10.5 to Alco's 1992 Form
10-K, is incorporated herein by reference.
10.6 1986 Stock Option Plan, filed as Exhibit 10.6 to Alco's 1993 Form
10-K, is incorporated herein by reference.
10.7 1993 Directors' Stock Option Plan, filed as Exhibit 10.7 to Alco's
1993 Form 10-K, is incorporated herein by reference.
10.8 1980 Deferred Compensation Plan, filed as Exhibit 10.7 to Alco's
1992 Form 10-K, is incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.9 1985 Deferred Compensation Plan, filed as Exhibit 10.8 to Alco's
1992 Form 10-K, is incorporated herein by reference.
10.10 1991 Deferred Compensation Plan, filed as Exhibit 10.9 to Alco's
1992 Form 10-K, is incorporated herein by reference.
10.11 Retirement Plan for Non-Employee Directors, filed as Exhibit 10.10
to Alco's 1992 Form 10-K, is incorporated herein by reference.
10.12 Indenture, dated as of April 1, 1986 between Alco Standard
Corporation and the Chase Manhattan Bank, N.A., as Trustee, filed
as Exhibit 4.1 to Alco Standard Corporation's Registration
Statement No. 30-4829, is incorporated herein by reference.
10.13 Share Purchase and Transfer Agreement between IMM Industria
Beteiligungs GmbH and Alco Standard Corporation, filed as Exhibit
10.12 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.14 Offering Document dated May 14, 1993 Entitled "Recommended Cash
Offers for Erskine House Group", filed as Exhibit 10.14 to Alco's
1993 Form 10-K, is incorporated herein by reference.
10.15 Agreement re: Purchase and Sale of Assets among Alco Standard
Corporation, Georgia-Pacific Corporation and Butler Paper Company,
filed as Exhibit 10.15 to Alco's 1993 Form 10-K, is incorporated
herein by reference.
11 Statement re: Computation of earnings per share, filed as Exhibit
11 to Alco's 1993 Form 10-K, is incorporated herein by reference.
12.1 Ratio of Earnings to Fixed Charges, filed as Exhibit 12.1 to Alco's
1993 Form 10-K, is incorporated herein by reference.
12.2 Ratio of Earnings to Fixed Charges Excluding Captive Finance
Subsidiaries, filed as Exhibit 12.2 to Alco's 1993 Form 10-K, is
incorporated herein by reference.
12.3 Ratio of Earnings to Fixed Charges and Preferred Stock Dividends,
filed as Exhibit 12.3 to Alco's 1993 Form 10-K, is incorporated
herein by reference.
12.4 Ratio of Earnings to Fixed Charges and Preferred Stock Dividends
Excluding Captive Finance Subsidiaries, filed as Exhibit 12.4 to
Alco's 1993 Form 10-K, is incorporated herein by reference.
21 Subsidiaries of Alco Standard Corporation, filed as Exhibit 21 to
Alco's 1993 Form 10-K, is incorporated herein by reference.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of Attorney.
</TABLE>
<PAGE>
Alco Standard Corporation
Form 10-K/A--Fiscal Year Ended
September 30, 1993
EXHIBIT 23
CONSENT OF ERNST & YOUNG, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the following Registration
Statements on Form S-8 and Form S-3 and related prospectuses of our report
dated November 1, 1993, with respect to the consolidated financial statements
and schedules included in the Annual Report (as amended on Form 10-K/A) of
Alco Standard Corporation for the fiscal year ended September 30, 1993.
<TABLE>
<CAPTION>
Registration
Number Filing Date Description
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
2-66880 March 10, 1990 Alco Standard Corporation
1980 Deferred Compensation Plan
2-75296 December 11, 1982 Alco Standard Corporation
1982 Deferred Compensation Plan
2-70630 December 30, 1982 Alco Standard Corporation
1981 Stock Option Plan
33-00120 September 6, 1985 Also Standard Corporation
1985 Deferred Compensation Plan
33-4829 April 15, 1986 Alco Standard Corporation
$150,000,000 Debt Securities
33-3046 February 10, 1987 Alco Standard Corporation
1986 Stock Option Plan
33-20479 March 4, 1988 Alco Standard Corporation
Stock Participation Plan
33-22948 July 7, 1988 Alco Standard Corporation
Partners' Stock Purchase Plan
33-26732 January 27, 1989 Alco Standard Corporation
1989 Directors' Stock Option Plan
33-28763 May 17, 1989 Alco Standard Corporation
Unijax Inc. Capital Accumulation Plan
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Registration
Number Filing Date Description
- - ------------------------------------------------------------------------------------------
<S> <C> <C>
33-30497 August 14, 1989 Alco Standard Corporation
Canadian Group Registered
Retirement Savings Plan
33-35057 May 23, 1990 Alco Standard Corporation
Defined Contribution Plan
33-36745 September 10, 1990 Alco Standard Corporation
1991 Deferred Compensation Plan
33-38192 December 10, 1990 Alco Standard Corporation
Partners' Stock Purchase Plan
33-38193 December 10, 1990 Alco Standard Corporation
1986 Stock Option Plan
33-38519 January 14, 1991 Alco Standard Corporation
$150,000,000 Debt Securities,
Preferred Stock or Common Stock
33-41689 July 12, 1991 Alco Standard Corporation
292,864 Shares of Common Stock
33-41690 July 12, 1991 Alco Standard Corporation
3,300,001 Shares of Common Stock
33-84376 June 4, 1992 Alco Standard Corporation
Stock Award Plan
33-50974 August 17, 1992 Alco Standard Corporation
1,034,061 Shares of Common Stock
33-50976 August 17, 1992 Alco Standard Corporation
382,250 Shares of Common Stock
33-55004 November 24, 1992 Alco Standard Corporation
Stock Participation Plan
33-55096 November 24, 1992 Alco Standard Corporation
1993 Directors' Stock Option Plan
33-54742 December 15, 1992 Alco Standard Corporation
3,500,000 Depositary Shares
Convertible Preferred Stock
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Registration
Number Filing Date Description
- - ------------------------------------------------------------------------------------------------
<S> <C> <C>
33-62460 June 1, 1993 Alco Standard Corporation
$400,000,000 Debt Securities, Preferred
Stock or Common Stock ($1,500,000 of
which was previously registered under
Registration Statement No. 33-38519)
33-49863 July 30, 1993 Alco Standard Corporation
42,200 Shares of Common Stock
33-51183 November 24, 1993 Alco Standard Corporation
Partners' Stock Purchase Plan
33-52285 February 15, 1994 Alco Standard Corporation
$300,000,000 Debt Securities, Preferred
Stock or Common Stock ($96,700,000 of
which was previously registered under
Registration Statement No. 33-62460)
</TABLE>
Philadelphia, Pennsylvania
May 4, 1994
<PAGE>
EXHIBIT 24
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton and J. Kenneth
Croney as his attorneys-in-fact, each with the power of substitution, to
execute, on his behalf the foregoing Report on Form 10-K/A for filing with the
Securities and Exchange Commission ("SEC"), and to do all such other acts and
execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ RAY B. MUNDT
-----------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ J. MAHLON BUCK, JR.
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ WILLIAM F. DRAKE, JR.
------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ FREDERICK S. HAMMER
----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that she is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as her attorneys-in-fact, each with the power of substitution,
to execute, on her behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ BARBARA BARNES HAUPTFUHRER
-----------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ PAUL C. O'NEILL
------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ PAUL J. DARLING
------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ ROGELIO G. SADA
------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ JAMES J. FORESE
-----------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ JAMES W. STRATTON
--------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ JOHN E. STUART
---------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is a Director of Alco Standard
Corporation ("Alco").
The undersigned hereby appoints each of Ray B. Mundt, Hugh G. Moulton and
J. Kenneth Croney as his attorneys-in-fact, each with the power of substitution,
to execute, on his behalf the foregoing Report on Form 10-K/A for filing with
the Securities and Exchange Commission ("SEC"), and to do all such other acts
and execute all such other documents which said attorney may deem necessary or
desirable.
Dated this 5th day of May, 1994.
SIGNED: /s/ DANA G. MEAD
---------------------
<PAGE>
CERTIFICATION
I, J. Kenneth Croney, Secretary of Alco Standard Corporation do hereby
certify that the following resolutions were duly passed by the Board of
Directors of the Corporation on November 12, 1993, and that such resolutions
are, as of the date hereof, in full force and effect:
FURTHER RESOLVED, that each of the officers and directors of the corporation
is hereby authorized to appoint Ray B. Mundt, Hugh G. Moulton and J. Kenneth
Croney as his or her attorneys-in-fact on behalf of each of them each
attorney-in-fact with the power of substitution, to execute on such officer's or
director's behalf, one or more registration statements and annual reports of
the corporation for filing with the Securities and Exchange Commission ("SEC"),
and any and all amendments to said documents which said attorney may deem
necessary or desirable to enable the corporation to register the offering of (i)
serial preferred stock; (ii) common stock; (iii) debt securities; and/or (iv)
participation interests in employee benefit plans under the Federal securities
law, and to further enable the corporation to file such reports as are necessary
under Section 13 or 15(d) of the Securities Exchange Act of 1934 and such other
documents as are necessary to comply with all rules, regulations or requirements
of the SEC in respect thereto; and
FURTHER RESOLVED, that any officer of the corporation is hereby authorized
to do and perform, or cause to be done or performed, any and all things and to
execute and deliver any and all agreements, certificates, undertakings,
documents or instruments necessary or appropriate in order to carry out the
purpose and intent of the foregoing resolutions.
IN WITNESS WHEREOF, the undersigned has set his hand this 5th day of May,
1994.
/s/ J. Kenneth Croney
--------------------------
J. Kenneth Croney
