<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1995
REGISTRATION NO.
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ALCO STANDARD CORPORATION
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OHIO 23-0334400 5111
(STATE OR OTHER (I.R.S. EMPLOYER (PRIMARY STANDARD
JURISDICTION OF IDENTIFICATION NO.) INDUSTRIAL
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
P.O. BOX 834
VALLEY FORGE, PENNSYLVANIA 19482
(610) 296-8000
J. KENNETH CRONEY, ESQUIRE
ALCO STANDARD CORPORATION
VICE PRESIDENT AND GENERAL COUNSEL
P.O. BOX 834
VALLEY FORGE, PENNSYLVANIA 19482
(610) 296-8000
COPIES TO:
RHONDA R. COHEN, ESQUIRE
BALLARD SPAHR ANDREWS & INGERSOLL
51ST FLOOR, 1735 MARKET STREET
PHILADELPHIA, PA 19103-7599
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLES OF EACH CLASS TO BE OFFERING PRICE AGGREGATE REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT* OFFERING PRICE* FEE
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<S> <C> <C> <C> <C>
Common Stock, no par
value(1)................ 10,000,000 $45.8125 $458,125,000 $157,974
</TABLE>
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* Estimated solely for the purpose of determining the registration fee, which
has been calculated pursuant to Rule 457(c), based on the average of the
high and low prices of Alco common stock reported on the NYSE Composite
Tape on November 28, 1995.
(1) Each share of Common Stock being registered hereunder includes a Preferred
Share Purchase Right.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
ALCO STANDARD CORPORATION
CROSS REFERENCE SHEET
BETWEEN ITEMS OF FORM S-1 AND THE PROSPECTUS
<TABLE>
<CAPTION>
ITEM LOCATION IN PROSPECTUS
---- ----------------------
<C> <S> <C>
1. Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus...... Front Cover Page
2. Inside Front and Outside Back
Cover Pages of Prospectus..... Inside Front Cover Page
3. Summary Information, Risk
Factors and Ratio of Earnings
to Fixed Charges.............. Business
4. Use of Proceeds................ Use of Proceeds
5. Determination of Offering
Price......................... Not Applicable
6. Dilution....................... Not Applicable
7. Selling Security Holders....... Not Applicable
8. Plan of Distribution........... Front Cover Page; Plan of Distribution
9. Description of Securities to be
Registered.................... Description of Common Stock and
Preferred Stock
10. Interests of Named Experts and
Counsel....................... Not Applicable
11. Information with Respect to the
Registrant.................... Front Cover Page; Business; Quarterly
Data; Report of Independent Auditors;
Consolidated Financial Statements;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Corporate Financial
Summary; Management; Certain
Transactions; Executive Compensation
12. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................... Not Applicable
</TABLE>
<PAGE>
PROSPECTUS
DECEMBER , 1995
[LOGO OF ALCO STANDARD CORPORATION APPEARS HERE]
10,000,000 SHARES OF COMMON STOCK
(NO PAR VALUE)
This prospectus describes the offering by Alco Standard Corporation ("Alco"
or the "Company") of shares of its common stock in connection with
acquisitions of businesses and properties which Alco (including its
subsidiaries) may make from time to time. A maximum of 10,000,000 shares of
common stock may be sold pursuant to this prospectus. These shares will
ordinarily represent consideration paid upon the acquisition of businesses or
properties. The shares may also include shares to be delivered upon the
exercise or satisfaction of conversion or purchase rights which are created in
connection with acquisitions or which were previously created or assumed by
the companies whose businesses or properties were acquired by Alco.
Shares offered hereby generally may be resold by the persons acquiring them
(including persons acquiring shares from Alco in acquisition transactions)
without further registration under the Securities Act of 1933, subject to
compliance with certain conditions. For further information on resales, see
"RESALES" in this prospectus.
Shares of common stock of Alco are listed on the New York, Philadelphia and
Chicago Stock Exchanges. As of November 27, 1995, there were approximately
14,694 holders of record of Alco's common stock. The reported closing price of
the common stock of Alco on the New York Stock Exchange Composite Tape on
November 27, 1995 was $46 1/8.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH
THE SALE OF ANY OF THE SECURITIES COVERED BY THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY ALCO. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE OF THE SECURITIES COVERED HEREBY SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ALCO
SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION MAY NOT
LAWFULLY BE MADE.
----------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
BUSINESS.................................................................. 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 7
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK........................... 13
MANAGEMENT................................................................ 16
EXECUTIVE COMPENSATION.................................................... 21
PLAN OF DISTRIBUTION...................................................... 29
RESALES................................................................... 29
USE OF PROCEEDS........................................................... 29
LEGAL OPINIONS............................................................ 30
EXPERTS................................................................... 30
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING....................... 30
REPORT OF INDEPENDENT AUDITORS............................................ 31
CONSOLIDATED FINANCIAL STATEMENTS......................................... 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................ 37
CORPORATE FINANCIAL SUMMARY............................................... 51
SEGMENT DATA.............................................................. 52
QUARTERLY DATA............................................................ 54
</TABLE>
----------------
AVAILABLE INFORMATION
Alco is subject to the informational requirements of the Securities Exchange
Act of 1934 and in accordance therewith files reports and other information
with the Securities and Exchange Commission. Reports, proxy statements and
other information filed by Alco with the Securities and Exchange Commission
can be inspected and copied at the public reference facilities maintained by
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its
Regional Offices at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, New York, New York
10048. Copies can also be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Reports, proxy statements and other information about Alco can also be
inspected at the New York, Philadelphia and Chicago Stock Exchanges (on which
Alco's common stock is listed).
Alco has filed with the Commission a Registration Statement on Form S-1
(together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933 with respect to the securities to
which this prospectus relates. This prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission.
For further information with respect to Alco and such securities, reference is
made to the Registration Statement. Statements contained in this prospectus as
to the contents of any contract or any other document filed, or incorporated
by reference, as an exhibit to the Registration Statement, are qualified in
all respects by such reference.
2
<PAGE>
BUSINESS
Alco Standard Corporation ("Alco" or the "Company") markets and distributes
office equipment, paper and supply systems through two business segments--Alco
Office Products ("AOP") and Unisource ("Unisource"). In fiscal 1995, Alco had
annual revenues of approximately $9.9 billion. 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: (610)
296-8000).
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
AOP sells, rents and leases photocopiers, fax machines and other automated
office equipment for use in both traditional and integrated office
environments. AOP also provides equipment service and supplies, equipment
financing and reprographic facilities management and specialized document
copying services.
AOP has locations throughout the United States and Canada, and in Europe
(primarily in the United Kingdom). 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 quality customer service,
price and product performance.
AOP distributes the products of numerous manufacturers, including Canon,
Oce, Ricoh and Sharp, throughout forty-eight states, six Canadian provinces
and in Europe. Customers include large and small businesses, professional
firms and government agencies.
During fiscal 1993, 1994 and 1995, AOP accounted for approximately 25%, 28%
and 29%, respectively, of Alco's consolidated revenues, and 50%, 55% and 53%,
respectively, of Alco's operating income (excluding Unisource restructuring
costs in 1993).
During fiscal 1995, AOP acquired 102 office products companies in the United
States, Canada, and Europe, with an aggregate of over $578 million in
annualized revenues. In May 1995, AOP acquired CopyAmerica, the largest copy
center in the country, which specializes in on-demand manuals and other short-
run documents. AOP's European expansion during fiscal 1995 included the
acquisition of seven companies in the United Kingdom, the largest of which was
Southern Business Group (renamed A: Copy (UK) PLC), with annualized revenues
of approximately $86 million.
UNISOURCE
Unisource markets and distributes quality printing and imaging products for
office and reprographic use. Through its supply systems segment, Unisource
also distributes disposable paper and plastic products, packaging systems and
maintenance supplies.
3
<PAGE>
During fiscal 1993, 1994 and 1995 Unisource accounted for approximately 75%,
72%, and 71%, respectively, of Alco's consolidated revenues from continuing
operations, and 50%, 45% and 47%, respectively, of Alco's operating income
(excluding Unisource restructuring costs in 1993).
Unisource focuses on five market segments: printing and publishing,
corporate imaging, general manufacturing, food processing and retail grocery.
Unisource combines its broad array of products with specialized customer
services and is implementing sophisticated information technology to tailor
solutions which lower the total cost of customers' procurement and improve the
efficiency of their operations. Unisource offers its customers coordinated
delivery of products, customized reporting and consolidated billing.
Unisource's national distribution capabilities allow it to respond quickly to
the customer's needs.
Unisource has locations in forty-five states, every province of Canada and
in Mexico. 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
quality customer service, price and the range of products maintained in
inventory.
In fiscal 1995, Unisource acquired twelve companies, primarily in supply
systems target markets, with $152 million in annualized revenues, including
four companies in Mexico.
STOCK SPLIT
On November 9, 1995, the Company effected a two-for-one split of its common
stock in the form of a stock dividend to shareholders of record on October 27,
1995. All common share and per share amounts reported by Alco in its
consolidated financial statements and in this prospectus have been adjusted to
give retroactive effect to the stock split.
UNISOURCE RESTRUCTURING PLAN
In September 1993, the Company adopted a plan to restructure Unisource's
distribution network, which included the following: installation of a
customer-focused information system, redesigning of warehouse and
transportation management functions, regionalization of management and
administrative support functions and consolidation of service center
locations. As a result of the restructuring, the Company recorded a pretax
charge of $175 million in the fourth quarter of fiscal 1993. At September 30,
1995, the remaining restructuring reserve was approximately $39 million, which
management believes is adequate to complete the restructuring plan in fiscal
1997.
BOARD AND MANAGEMENT CHANGES
In November 1995, John E. Stuart, who was appointed President and Chief
Executive Officer of Alco in August 1993, was named Chairman of the Board of
Directors, succeeding Ray B. Mundt. Mr. Mundt retired as an active employee of
Alco effective December 31, 1994 and will continue to serve as a member of the
Board.
In August 1995, Kurt E. Dinkelacker (who had been serving as Executive Vice
President and Chief Financial Officer of Alco) was named President of Alco
Office Products. Mr. Dinkelacker will continue as an Executive Vice President
of Alco.
In January 1995, William T. Leith was named President of Unisource and a
Vice President of Alco. Mr. Leith, who had been serving as Executive Vice
President for Unisource's U.S. Operations, now directs all of Unisource's
operations throughout the United States, Canada and Mexico.
4
<PAGE>
Among other executive changes during fiscal 1995, Yves Montmarquette was
named President of Unisource Canada, succeeding Raymond (Pike) Peterson,
Donald R. Smallwood was appointed President of Unisource Distribuidora, and
William M. Laughlin was named Vice President, Acquisitions of Unisource.
In August 1995, Elisabeth H. Barrett was appointed Vice President--
Administrative Services of Alco.
In August 1995, Barbara Barnes Haupfuhrer, a member of the Board since 1988,
was named Chairman of the Independent Directors. J. Mahlon Buck, Jr., who has
been a director since 1984, retires from the Board in January 1996.
EQUITY OFFERINGS
In July 1995, Alco completed a public offering of 3,877,200 depositary
shares, each representing 1/100 of a share of Series BB conversion preferred
stock, and used the net proceeds of approximately $290 million to reduce
outstanding debt.
DIVESTITURES
In September, 1995, the Company sold its Central Products Company to
Spinnaker Industries, Inc. Central Products, which manufactures paper-based
carton sealing tapes, has annualized revenues of approximately $120 million.
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. Supplier relationships are good and are
expected to continue. Neither AOP nor Unisource 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.
Many of Alco's operations are required to carry significant amounts of
inventory to meet rapid delivery requirements of customers. At September 30,
1995, inventories accounted for approximately 35% of Alco's total current
assets.
PROPRIETARY MATTERS
Alco has a number of patents, licenses and trademarks. Alco does not
believe, however, that any one patent, license or trademark is material to its
operations as a whole.
ENVIRONMENTAL REGULATION
Environmental laws and liabilities relating to Alco's current businesses
(which are primarily distribution operations) have not had and are not
expected to have a material adverse effect upon Alco's capital expenditures,
earnings or competitive position. The Company has owned several manufacturing
and industrial businesses, all of which have been sold. Alco has retained
certain environmental liabilities relating to the pre-divestiture waste
disposal activities of these discontinued businesses at manufacturing or
landfill sites in the United States. As a result of several recent
environmental remediation claims and increased costs associated with existing
environmental remediation sites (primarily related to discontinued
manufacturing operations divested by the Company in 1991 and prior, no one of
which is material on an individual basis to the Company's operations taken as
a whole), the Company took a fourth quarter charge in fiscal 1995 to increase
its accrual for environmental remediation. The discontinued operations charge
was approximately $24 million ($17 million net of tax) or $.14 per share. The
adjustment reflects management's best estimate, based on information currently
available, of costs to be incurred in connection with all existing and
probable environmental liabilities relating to discontinued operations (which
currently relate to eighteen different sites). Since most environmental claims
are paid over a period of years, the impact on annual cash flow is expected to
be minimal. While it is not possible to estimate what expenditures may be
required in order for Alco to comply with environmental laws or discharge
environmental liabilities in the future, Alco does not expect that
expenditures for environmental claims will have a material adverse effect on
it or its operations taken as a whole.
5
<PAGE>
EMPLOYEES
At September 30, 1995, Alco had approximately 36,500 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. In June 1995,
Erskine Limited, a U.K. subsidiary of Alco, purchased all of the outstanding
shares of Southern Business Group PLC (SBG) and changed SBG's name to A:Copy
(UK) PLC ("A:Copy"). A:Copy has annualized revenues of approximately $86
million, and sells, leases, services and remanufactures copiers and other
office equipment in Southern England. In September 1995, AOP further expanded
its presence in the United Kingdom by acquiring Copymore PLC, an office
equipment distributor with approximately $52 million in annualized revenues.
Unisource expanded into Mexico during fiscal 1995, acquiring four new
companies with 18 locations.
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.
PROPERTIES
At September 30, 1995, Alco owned or leased facilities in fifty states, nine
Canadian provinces, in Europe and in Mexico. These properties occupy a total
of approximately 23 million square feet of which approximately 7 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.
LEGAL PROCEEDINGS
During 1995, Alco agreed to pay $10 million to settle a claim by a former
subsidiary which had asserted that Alco was liable to it for certain employee
liabilities. This amount was primarily charged against existing reserves for
discontinued operations. The Company paid $5 million during 1995 with the
remaining $5 million to be paid over the next four years.
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.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL REVIEW
ALCO STANDARD CORPORATION AND SUBSIDIARIES
The discussion of the results of operations for the three years ended
September 30, 1995 reviews the continuing operations of Alco as contained in
the Consolidated Statements of Income.
RESULTS OF OPERATIONS--1995
Revenues and income before taxes by segment for fiscal years ended September
30, 1995 andSeptember 30, 1994 and the percentage change for 1995 versus 1994
were:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
------------------------ ---------------------------
1995 1994 % CHANGE 1995 1994 % CHANGE
------ ------ -------- ------ ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products..... $2,912 $2,240 30.0% $251.8 $ 199.4 26.3%
Unisource
United States.......... 6,183 5,108 21.0 184.1 148.8 23.7
Canada................. 804 649 23.9 41.0 13.5 203.7
------ ------ ------ -------
Total Unisource...... 6,987 5,757 21.4 225.1 162.3 38.7
------ ------ ------ -------
Operating................ 9,899 7,997 23.8 476.9 361.7 31.8
Unconsolidated affili-
ate..................... (117.2)
Eliminations and
nonallocated............ (7) (1) (117.0)* (87.7)*
------ ------ ------ -------
$9,892 $7,996 23.7 $359.9 $ 156.8
====== ====== ====== =======
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
FISCAL 1995 COMPARED TO FISCAL 1994
The Company increased revenues $1.9 billion to $9.9 billion in fiscal 1995
from $8 billion in fiscal 1994. Income before taxes increased from $156.8
million in fiscal 1994 to $359.9 million in fiscal 1995. Earnings per share
increased from $.55 to $1.67. Earnings per share from continuing operations in
fiscal 1995 were $1.81, a 26.6% increase over $1.43 per share in 1994,
excluding the loss on the sale of IMM Office Systems (IMMOS).
Alco Office Products (AOP) generated $672 million in increased revenues of
which $387 million is related to AOP's base companies, while $68 million
relates to fiscal 1994 acquisitions and $217 million to current-year
acquisitions. Internal growth in AOP's base companies continues to be across
all revenue segments but primarily in equipment sales, outsourcing and
supplies. Revenues from Unisource's US operations increased $1.1 billion, of
which $74 million relates to current- and prior-year acquisitions. Unisource's
Canadian operations increased revenues $155 million, which is net of a
negative impact of approximately $12 million relating to foreign currency rate
fluctuations. Increased revenue at Unisource is primarily related to
substantial price increases experienced in the paper industry during fiscal
1995, as well as sales volume increases.
AOP's operating income increase of $52.4 million includes $6.1 million from
fiscal 1994 acquisitions and $20.2 million from current-year acquisitions. The
remaining $26.1 million increase from its base companies is primarily the
result of higher operating contributions from the equipment, outsourcing and
supply areas of AOP's businesses, along with increased operating income
relating to its leasing activities through Alco Capital Resource, Inc. (Alco
Capital), net of transformation program costs. Operating margins were 8.6% in
1995 compared to 8.9% in 1994. Excluding costs related to the AOP
transformation program, the operating margin for 1995 was 9.0%.
7
<PAGE>
Operating income for Unisource's US operations increased $35.3 million. This
increase includes $3.9 million contributed by current- and prior-year
acquisitions. The remaining $31.4 million is from base companies, reflecting
the impact of price and volume increases along with the net benefits realized
from its restructuring program. Operating income for the Canadian paper
operations increased $27.5 million primarily as a result of price increases
and growth in the fine paper distribution business and restructuring benefits.
Unisource's operating margins increased to 3.2% in fiscal 1995, from 2.8% in
the prior year.
The Company's foreign operations of AOP and Unisource generated $1.1 billion
in revenues for fiscal 1995 compared with $843 million for the same period of
the prior fiscal year. The Canadian paper distribution business represents
$155 million or 62% of the total increase. The increase also includes $78
million from AOP's European operations and $17 million from AOP's Canadian
operations. Operating income from foreign operations was $69 million for 1995,
up $40 million from the prior year primarily as a result of the increase in
operating income of the Canadian paper distribution business. In fiscal 1994,
the Company recorded a total pretax loss of $117.2 million from its investment
in IMMOS.
In September 1995, the Company divested Central Products Company for $80
million in cash and notes and recorded a continuing operations pretax gain of
approximately $4 million on the sale. Also included in the Company's
continuing operations, and related to Central Products Company, are fiscal
1995 revenues of approximately $120 million and net income of $2.7 million.
Interest expense increased $12 million from the comparable period in fiscal
1994, as a result of higher interest rates and borrowing levels during the
year to fund acquisitions and working capital requirements, offset by the
effect of the debt reductions resulting from the Company's conversion
preferred stock offering in July 1995. The increase in income from continuing
operations before taxes of $203.1 million consists of $85.9 million relating
to the combined effect of improved operations from base companies and earnings
contributed by acquisitions, net of increased interest costs and other
corporate items and the $117.2 million loss on the investment in IMMOS
recorded in 1994. The effective income tax rate for the current period is
39.1%. The effective tax rate for 1994 was 55%; however, excluding the IMMOS
loss, the effective rate was 39.1%. Fiscal 1995 weighted average shares were
5.1 million shares greater than the 107.5 million shares for fiscal 1994,
primarily the result of issuance of shares for acquisitions.
The Company has owned several manufacturing and industrial businesses, all
of which have been sold. Alco has retained certain environmental liabilities
relating to the pre-divestiture waste disposal activities of these
discontinued businesses at manufacturing or landfill sites in the United
States. As a result of several recent environmental remediation claims and
increased costs associated with existing environmental remediation sites
(primarily related to discontinued manufacturing operations divested by the
Company in 1991 and prior, no one of which is material on an individual basis
to the Company's operations taken as a whole), the Company took a fourth
quarter charge in fiscal 1995 to increase its accrual for environmental
remediation. The discontinued operations charge was approximately $24 million
($17 million net of tax) or $.14 per share. The adjustment reflects
management's best estimate, based on information currently available, of costs
to be incurred in connection with all existing and probable environmental
liabilities relating to discontinued operations (which currently relate to
eighteen different sites). Since most environmental claims are paid over a
period of years, the impact on annual cash flow is expected to be minimal.
While it is not possible to estimate what expenditures may be required in
order for Alco to comply with environmental laws or discharge environmental
liabilities in the future. Alco does not expect that expenditures for
environmental claims will have a material adverse effect on it or its
operations taken as a whole.
The major components of the Unisource restructuring plan are proceeding as
planned. Unisource management has reduced the pace at which certain changes
are being made in order to better control the transformation process, thereby
affecting the pace of planned headcount reductions and the timing of
originally anticipated net benefits. Unisource expects to achieve the full
benefit of the projected $100 million net annual benefits resulting from the
completion of the restructuring in fiscal 1997. The restructuring reserve
atSeptember 30, 1995 is $39.3 million, which management believes is adequate
to complete the restructuring plan.
8
<PAGE>
AOP has initiated a three-year transformation program to change its
organization into a more cohesive and efficient network by building a uniform
information technology system and implementing best practices for critically
important management functions throughout the AOP companies. The initiative
will include the exploration of new vendor alliances, the establishment of a
national identity for the group and a targeted national accounts program.
The Company was in arbitration with a former subsidiary, which had asserted
that the Company was liable for certain employee liabilities. During the
second quarter of fiscal 1995, the Company agreed to pay $10 million to the
former subsidiary to settle this claim, which primarily has been charged
against existing reserves for discontinued operations. The Company paid $5
million during the second quarter with the remaining $5 million to be paid
over the next four years.
In fiscal 1996, the Company plans to early adopt Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." The effect on earnings of
this accounting change is expected to be immaterial.
RESULTS OF OPERATIONS--1994
Revenues and income before taxes by segment for fiscal years ended September
30, 1994 andSeptember 30, 1993 and the percentage change for 1994 versus 1993
were:
<TABLE>
<CAPTION>
REVENUES INCOME BEFORE TAXES
------------------------ ----------------------------
1994 1993 % CHANGE 1994 1993 % CHANGE
------ ------ -------- ------- ------- --------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Alco Office Products.... $2,240 $1,586 41.2% $ 199.4 $ 138.8 43.7%
Unisource
United States......... 5,108 4,174 22.4 148.8 118.7 25.4
Canada................ 649 690 (5.9) 13.5 18.3 (26.2)
Restructuring costs... (175.0)
------ ------ ------- -------
Total Unisource..... 5,757 4,864 18.4 162.3 (38.0)
------ ------ ------- -------
Operating............... 7,997 6,450 24.0 361.7 100.8
Unconsolidated
affiliate.............. (117.2) (2.5)
Eliminations and
nonallocated........... (1) (5) (87.7)* (73.7)*
------ ------ ------- -------
$7,996 $6,445 24.1 $ 156.8 $ 24.6
====== ====== ======= =======
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
FISCAL 1994 COMPARED WITH FISCAL 1993
The Company's revenues for fiscal 1994 were $8 billion, an increase of $1.5
billion over fiscal 1993 revenues of $6.5 billion. Income before taxes from
operations increased to $361.7 million from $100.8 million in fiscal 1993,
which included a restructuring charge of $175 million related to the Unisource
operations. Earnings per share from continuing operations for fiscal 1994 were
$.55 compared to $(.02) for fiscal 1993 which included a loss of $1.19 per
share resulting from the Unisource restructuring charge. Earnings per share
excluding the loss on the sale of the investment in IMMOS in fiscal 1994 and
the effect of the restructuring charge in fiscal 1993 were $1.43 and $1.17,
respectively.
AOP generated $654 million in increased revenues, of which $288 million
relates to fiscal 1993 acquisitions and $134 million to fiscal 1994
acquisitions. The remaining $232 million increase reflects continued internal
growth in all revenue areas of AOP's base companies, particularly in its
equipment, service and outsourcing businesses. The $934 million increase in
revenues from Unisource's US operations includes $764 million from
acquisitions (primarily Butler Paper) and $170 million of internal growth from
its base companies. The $41
9
<PAGE>
million revenue decrease in the Unisource Canadian paper businesses is
primarily attributable to a 5.9% decrease in the average foreign exchange
rate.
AOP's operating income increase of $60.6 million includes $16.4 million from
prior-year acquisitions and $10.2 million from current-year acquisitions. The
remaining $34 million increase reflects continued internal growth from its
base companies, which is primarily the result of higher operating
contributions from the service, supply and outsourcing areas of AOP's
businesses, along with increased operating income related to its leasing
activities through Alco Capital. Operating income from Unisource's US paper
operations increased $30.1 million. This increase represents a contribution of
$17.6 million from prior-year acquisitions and $12.5 million from its base
companies. The internal growth is attributable to improved gross margins and
expense reductions realized in the last half of the fiscal year offset
primarily by lower comparable margins experienced in the first half of the
year. The Canadian paper distribution business decrease in operating income of
$4.8 million is the result of the carryover of certain incremental merger
costs related to the Canadian merger plan implemented in fiscal 1993, gross
margin erosion in the first half of the fiscal year and the effects of the
declining foreign exchange rates.
Geographically, revenues from the Company's paper and office products
operations outside the U.S. were $843 million for fiscal 1994 compared to $800
million for the prior fiscal year. The increase reflects $77 million from the
European operations of Erskine acquired in fiscal 1993 along with $7 million
from AOP internal growth, offset by a decrease of $41 million from the
Canadian paper distribution business. Operating income from foreign operations
was $29.1 million for fiscal 1994, an increase of $1.8 million from the prior
year, the result of increased AOP foreign operations, offset by the decrease
in operating income of the Canadian paper distribution business.
The 49.9% investment in IMMOS in October 1992 marked the entry of the
Company into the European market, and it was to serve as a base for further
expansion in Europe. The venture agreement provided the Company with the
option of acquiring the remaining shares of IMMOS over a three-year period
beginning in 1996 if IMMOS achieved certain operating goals. However, the
capital structure and organizational complexities of IMMOS, exacerbated by the
distressed European economy and operational differences among the venture
partners, had prevented IMMOS from progressing toward those goals. As a
result, in September 1994, the Company sold its 49.9% interest in IMMOS for
cash plus a passive interest in any subsequent sale of IMMOS for five years.
The Company retains no ongoing liability in the joint venture and the parties
exchanged complete mutual releases for past actions. In addition, the Company
was relieved of the covenant not to compete in Europe contained in the joint
venture agreement, although the parties will not compete with each other for a
period expiring on December 31, 1995. As part of the transaction, the Company
acquired profitable operations in Denmark and France and retained limited
operations in Germany. The Company recognized a loss on the sale of its
interest in IMMOS in the quarter ended June 30, 1994, and recorded a pretax
loss of $115.3 million ($95.1 million, net of tax) equating to a loss per
share of $.87 for the quarter ($.88 for fiscal 1994). This charge represents
the write-off of the Company's investment in IMMOS plus certain transactional
costs less cash proceeds from the sale together with related tax benefits. For
the fiscal year ended September 30, 1994, the Company recorded a total pretax
loss of $117.2 million from its investment in an unconsolidated affiliate.
This includes a pretax loss of $115.3 million relating to the sale previously
discussed and a $1.9 million operating loss on its investment through March
31, 1994.
Interest expense increased by $3.6 million from fiscal 1993, a result of
higher interest rates and borrowing levels during the year. Income before
taxes from continuing operations increased by $132.2 million, which reflects
the net effect of the $115.3 million loss on the sale of IMMOS in fiscal 1994
and the $175 million charge for restructuring costs in fiscal 1993. Income
before taxes from continuing operations also includes improved operating
results from base companies and earnings contributed by current- and prior-
year acquisitions net of increased interest costs and other corporate items.
The effective income tax rate for fiscal 1994 was 55% com-pared to 69% in
fiscal 1993. The effective income tax rate for fiscal 1994, excluding the
effect of the sale of IMMOS, was 39.1% compared with 39.6% in fiscal 1993,
excluding the effect of the restructuring costs. Fiscal
10
<PAGE>
1994 weighted average shares were 12.7 million shares greater than the 94.8
million shares for fiscal 1993, primarily the result of a public offering of
common stock in December 1993.
During the first quarter of fiscal 1994, the Company adopted Statement of
Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions" and Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes"; the individual
and combined effect on earnings of these accounting changes was immaterial.
FINANCIAL CONDITION AND LIQUIDITY
Debt, excluding finance subsidiaries, was $632 million at September 30,
1995, an increase of $187 million from the Company's debt balance at September
30, 1994 of $445 million. This increase in borrowing levels was primarily to
satisfy the Company's working capital and acquisition requirements, net of the
proceeds from the July 1995 conversion preferred stock offering described
below. On December 1, 1994, the Company entered into a credit agreement under
which it may borrow up to $500 million. The Company may also borrow up to $100
million under another credit agreement. At September 30, 1995, short-term
borrowings supported by these two facilities totaled $252.5 million, leaving
$347.5 million unused and available. Debt as a percentage of capitalization
was 25.3%, while the current ratio was 1.6 to 1. In July 1995, Moody's
Investor Services upgraded the Company's debt rating to A3, from Baa1. At the
end of fiscal 1995, the Company's commitments for capital expenditures were
approximately $23 million, all of which are expected to be expended during
fiscal 1996.
In July 1995, the Company completed a public offering of approximately 3.9
million depositary shares, each representing 1/100 of a share of Series BB
Conversion Preferred Stock. The Series BB Preferred Stock carries a dividend
yield of 6.5% and automatically converts into the Company's common stock on
October 1, 1998, unless previously converted at the option of the holder. The
purpose of the offering is to fund the Company's ongoing acquisition program.
Net proceeds of approximately $290 million were used to repay short-term
borrowings incurred to fund working capital requirements and acquisitions.
The Company recorded a pretax charge of approximately $24 million for
environmental claims associated with discontinued manufacturing operations
during the fourth quarter of fiscal 1995. Since most environmental claims are
paid over a period of years, the impact on annual cash flow is expected to be
minimal.
The Company's change in cash from operating activities during fiscal 1995
primarily relates to working capital requirements. Unisource's working capital
primarily reflects the effects of substantial price increases experienced in
the paper business along with the increased sales volume. Changes in AOP's
working capital primarily relate to inventory from growth in the business
along with supplier price increases.
The Company estimates that total cash expenditures in connection with the
Unisource restructuring plan will amount to $143 million, of which
approximately $112 million has been spent to date, with the $31 million
balance anticipated to be paid in fiscal 1996 and early fiscal 1997. Effective
January 1, 1994, Unisource entered into a ten-year agreement with ISSC for
$300 million, to provide the information technology system to be implemented
as part of the restructuring plan. At September 30, 1995, the remaining
commitment under the agreement is $217 million. The foregoing commitments are
anticipated to be funded from Unisource's operating cash flow.
Finance subsidiaries debt grew by $352.7 million from September 30, 1994, a
result of increased leasing activity. On June 30, 1995, Alco Capital increased
the amount available to be offered under its medium term note program by $1
billion or the equivalent thereof in foreign currency, of which $898 million
is unused and available. The program allows Alco Capital to offer to the
public from time to time medium term notes having an aggregate initial
offering price not exceeding the total program amount. These notes are offered
at varying maturities of nine months or more from their dates of issue and may
be subject to redemption at the option of Alco Capital or repayment at the
option of the holder, in whole or in part, prior to the maturity date in
conjunction with meeting specified provisions. Interest rates are determined
based on market conditions at the
11
<PAGE>
time of issuance. As of September 30, 1995, $602 million of medium term notes
bearing a weighted average interest rate of 7.0% were outstanding.
In addition, Alco Capital entered into an agreement in September 1994 to
sell under an asset securitization program, an undivided ownership interest in
$125 million of eligible direct financing lease receivables. The agreement,
which expires in September 1996, contains limited recourse provisions that
require Alco Capital to assign an additional undivided interest in leases to
cover any potential losses to the purchaser due to uncollectible leases. As
collections reduce previously sold interests, new lease receivables can be
sold up to $125 million. During fiscal 1995, Alco Capital sold $67 million in
direct financing leases, replacing those leases liquidated and leaving the
total amount of contracts sold unchanged at $125 million.
The Company believes that its operating cash flow together with unused lines
of credit and other financing arrangements will be sufficient to finance
current operating requirements including capital expenditures, acquisitions
and restructuring and transformation programs.
12
<PAGE>
DESCRIPTION OF COMMON STOCK AND PREFERRED STOCK
The Company is currently authorized to issue 150,000,000 shares of Common
Stock and 2,135,878 shares of Serial Preferred Stock ("Preferred Stock"). On
January 25, 1996, Alco's shareholders are expected to approve an increase in
the authorized number of common shares from 150,000,000 to 300,000,000. Both
classes are without par value. The Common Stock is subject to the express
terms of the Preferred Stock. The Preferred Stock may be issued from time to
time in one or more series, without stockholder approval, with such
designations, preferences and relative rights, and qualifications,
limitations, or restrictions thereof as shall be adopted by the Board of
Directors. Two series of Preferred Stock are currently outstanding.
DIVIDEND RIGHTS
Common Stock. Dividends and other distributions of assets may be made with
respect to the Common Stock from time to time by the Board of Directors within
the limits and from the sources permitted by law after payment or provision
for payment of all accrued and unpaid dividends (which are cumulative) on the
Preferred Stock, so long as there is no default in any sinking fund provisions
for the Preferred Stock.
Preferred Stock. The outstanding Preferred Stock is entitled to payment of
annual per share dividends as follows: Series AA, $237.50 ($2.375 per
Depositary Share) through January 2, 1996 and $325.00 ($3.25 per Depositary
Share) thereafter; and Series BB, $504.00 ($5.04 per Depositary Share).
So long as any shares of Preferred Stock are outstanding, the Company may
not (a) declare or pay any dividends (other than dividends payable in Common
Stock or other shares of the Company ranking junior to the Preferred Stock) to
holders of Common Stock or shares of the Company of any other class ranking on
a parity with or junior to the Preferred Stock, or (b) make any distributions
of assets (directly or indirectly, by purchase, redemption or otherwise) to
the holders of Common Stock or shares of the Company of any other class
ranking on a parity with or junior to the Preferred Stock (except in the case
of shares purchased in compromise of claims, or to prevent loss on doubtful
debts and except in the case of shares purchased out of the proceeds of the
sale of Common Stock or other shares ranking junior to the Preferred Stock
received by the Company, subsequent to January 1, 1968):
(a) Unless all accrued and unpaid dividends on shares of Preferred Stock,
including the full dividends for the then quarterly dividend period, shall
have been paid or declared and funds sufficient for payment thereof set
apart; and
(b) Unless there shall be no arrearages with respect to redemption of
shares of Preferred Stock from any sinking fund provided therefor.
No dividends may be paid upon or declared or set apart for any of the
Preferred Stock for any quarterly dividend period unless at the same time a
like proportionate dividend for the same quarterly dividend period, ratably in
proportion to the respective annual dividend rates fixed therefor, shall be
paid upon or declared or set apart for all Preferred Stock of all series then
issued and outstanding and entitled to receive such dividend.
PREEMPTIVE RIGHTS
Common Stock. The holders of Common Stock do not have any preemptive right
to purchase or have offered to them for purchase any shares or other
securities of the Company.
Preferred Stock. The only preemptive right of holders of Preferred Stock is
to participate in certain distributions, if any were to be made by the
Company, to holders of Common Stock of options or rights to acquire Common
Stock, or of evidences of the Company's debt or assets (other than cash).
13
<PAGE>
PREFERRED SHARE PURCHASE RIGHTS
In February 1988, the Company declared and paid a dividend distribution of
one right for each outstanding share of Common Stock. The Rights become
exercisable ten days (or such later date, not beyond thirty days, as is fixed
by the Board of Directors) after the earlier of: (a) public announcement that
an individual or group has acquired or obtained the right to acquire 20% or
more of the Company's Common Stock or (b) an individual or group commences or
announces an intention to commence a tender or exchange offer that could
result in the acquisition of 30% or more of such securities (the "Separation
Date"). When exercisable, each Right entitles the holder to purchase one one-
hundredth of a share of Alco's Series 12 Preferred Stock for $75 (the
"Exercise Price"), subject to adjustment. Further, if any person or group
owning 20% or more of Alco's outstanding Common Stock (a) engages in certain
self-dealing practices with the Company, or (b) causes the Company to forego
or reduce quarterly dividends or take an action which would result in a more
than 2% increase in the other entity's proportionate share of the Company's
outstanding shares; or if any person or group acquires 30% or more of the
Company's outstanding stock, each Right would entitle the holder thereof to
acquire for the Exercise Price shares of Common Stock having a market value
equal to twice the Right's exercise price.
If the Company were acquired in a merger or other business combination, or
if more than 50% of its earning power or assets were sold in one transaction
or a series of transactions, each Right would entitle the holder thereof to
purchase shares of the acquiring company's common stock having a market value
equal to twice the Right's exercise price. The Rights that are or were held by
a person or group owning 20% or more of Alco's outstanding voting securities
become void if such person or group engages in an event which entitles holders
of the Rights to purchase Common Stock or common stock of the acquiring
company having a market value equal to twice the Right's exercise price.
The Rights, which expire on February 10, 1998, are non-voting and may be
redeemed by Alco at a price of $.05 per Right any time prior to ten days after
public announcement that a person has acquired 20% or more of the Company's
outstanding voting securities. Until the Separation Date, the Rights are
transferable with and only with the Common Stock.
VOTING RIGHTS
Common Stock. Subject to certain voting rights of holders of the Preferred
Stock to vote in certain circumstances and with respect to certain matters as
a class, the holders of the Common Stock currently have full voting rights
upon all matters presented for shareholder action. Shareholders do not have
the right to cumulate votes in electing directors.
Preferred Stock. The holders of Preferred Stock are entitled to one vote per
share, and except as otherwise provided by specific provisions of the
Company's Articles of Incorporation or by Ohio law, to vote on all matters
together with the holders of Common Stock as one class. The holders of
Preferred Stock are not entitled to cumulate votes in electing directors. The
Articles of Incorporation of Alco provide that in the event of default in the
payment, in whole or in part, of six quarterly dividends on the Preferred
Stock, whether or not consecutive, the holders of shares of Preferred Stock
will be entitled to elect two directors of the Company, to serve in addition
to the directors otherwise elected. Such right to elect additional directors
is in lieu of the other rights of the holders of Preferred Stock to vote for
directors, and will remain in effect until no quarterly dividend is in
default. It is also provided that the vote or written consent of at least two-
thirds of the outstanding shares of Preferred Stock voting as a class is
necessary to effect (i) any amendment or repeal of any of the provisions of
the Articles of Incorporation or the Code of Regulations of Alco which affects
the voting powers, rights, privileges or preferences of the holders of the
Preferred Stock, (ii) the authorization or issue of any stock, or any security
convertible into any stock, ranking prior to the Preferred Stock, (iii) the
purchase or redemption of less than all the Preferred Stock then outstanding
(except in accordance with a stock purchase offer made to all holders of
Preferred Stock) when any dividends or sinking fund obligations on the
Preferred Stock are in arrears, or (iv) the sale, lease or conveyance by Alco
of all or substantially all of its property or business, its voluntary
liquidation or dissolution, or its consolidation with or merger into any other
corporation, unless the resulting
14
<PAGE>
corporation will have no shares authorized or outstanding ranking prior to or
on a parity with the Preferred Stock except the same number with the same
rights and preferences as those of the Company authorized and outstanding
immediately preceding such consolidation or merger, and unless each holder of
Preferred Stock immediately prior thereto receives the same number of shares,
with the same rights and preferences, of the resulting corporation. It is
further provided that the vote or written consent of two-thirds of the holders
of shares of any series is necessary to amend the Articles of Incorporation or
Code of Regulations of the Company in such a way as to affect adversely and
particularly the preferences, rights, powers or privileges of such series. No
such vote or consent of the holders of Preferred Stock or any series thereof
is required if provision has been made for the redemption of all of the
Preferred Stock (or any series thereof). In addition, the Company may not
create additional classes of stock or increase the authorized number of shares
of Preferred Stock ranking on a parity with the Preferred Stock with respect,
in each case, to the payment of dividends and amounts upon liquidation,
dissolution and winding up without the vote or written consent of at least a
majority of the outstanding shares of Preferred Stock voting as a class.
REDEMPTION PROVISIONS AND SINKING FUND
Common Stock. The Common Stock is not redeemable.
Preferred Stock. The directors are empowered to determine any redemption
rights and price of each series of the Preferred Stock.
The Series AA Preferred Stock and the Depositary Shares representing such
stock are not redeemable prior to January 9, 1996. On and after January 9,
1996 and until January 9, 2000, the Series AA Preferred Stock will be
redeemable, in whole or in part, at the option of the Company, for such number
of shares of Common Stock as are issuable at a conversion price of $22.32 per
share of Common Stock (equivalent to an approximate conversion rate of 2.2402
shares of Common Stock for each Depositary Share), subject to adjustment in
certain circumstances. The Company may exercise this option only if for 20
trading days within any period of 30 consecutive trading days, including the
last trading day of such 30 trading day period, the closing price of the
Common Stock on the New York Stock Exchange ("NYSE") exceeds $29.02, subject
to adjustment in certain circumstances. Subject to the market price of the
Common Stock, Alco intends to exercise its option to redeem all of the Series
AA Preferred Stock as soon as practicable after January 9, 1996. On and after
January 9, 2000 (if the option to redeem is not previously exercised by Alco)
the Series AA Preferred Stock will be redeemable, in whole or in part at the
option of the Company, for cash at a redemption price equivalent to $50.00 per
Depositary Share, plus accrued and unpaid dividends. The Series AA Preferred
Stock is not entitled to the benefit of any sinking fund.
The Series BB Preferred Stock and the Depositary Shares representing such
stock are not redeemable.
CONVERSION RIGHTS
Common Stock. The Common Stock is not convertible into any other security.
Preferred Stock. The directors are empowered to determine whether the shares
of any series of the Preferred Stock will be convertible into Common Stock,
and, if so, the conversion price or prices and the other terms or provisions
of such rights. Series AA is convertible at any time prior to the close of
business on the redemption date thereof at a conversion price of $22.32 per
share of Common Stock (equivalent to an approximate conversion rate of 2.2402
shares of Common Stock per Depositary Share). Series BB preferred shares are
convertible at the option of the holder until October 1, 1998, at which time
each share will automatically convert to a number of shares of Common Stock
determined by an exchange rate which will vary based on the market price of
the Common Stock at that time, and which will range from 1.6393 to 2.0 shares
of Common Stock per Depositary Share. The conversion rights with respect to
the outstanding Preferred Stock are subject to proportionate adjustment if
Alco combines or splits the outstanding shares of Common Stock or pays a
dividend in Common Stock. Shares of Common Stock issuable upon the exercise of
outstanding stock options are similarly subject to proportionate adjustment in
such events. Shares of Preferred Stock which have been converted must be
retired and may not be reissued.
15
<PAGE>
LIQUIDATION RIGHTS
Common Stock. The holders of Common Stock are entitled pro rata to the
assets of Alco in the event of voluntary or involuntary liquidation, subject
to the rights of creditors and the rights of the holders of the Preferred
Stock to receive certain per share amounts plus accrued unpaid dividends.
Preferred Stock. In the event of voluntary or involuntary liquidation, the
holders of the outstanding Preferred Stock are entitled to receive the
following per share amounts plus accrued and unpaid dividends: Series AA,
$5,000.00 ($50.00 per Depositary Share); and Series BB, $7,737.50 ($77.375 per
Depositary Share). At September 30, 1995, the preference upon liquidation of
the shares of Preferred Stock of Series AA and Series BB aggregated
$501,248,000. After provision for the liquidation preference of Preferred
Stock at September 30, 1995, the portion of shareholders' equity applicable to
Common Stock was $1,367,000,000. In the opinion of counsel for Alco, there are
no restrictions upon the payment of dividends or other distributions out of
surplus solely by reason of the excess of the liquidation preference over the
carrying value of the Preferred Stock, and there are no remedies available to
security holders before or after the payment of any dividend or distribution
solely because such dividend may reduce surplus to an amount less than the
amount of such excess. The Preferred Stock has priority over the Common Stock
on any liquidation, dissolution or winding up to the extent of the liquidation
price plus any accrued and unpaid dividends. The directors have authority in
establishing any series to determine the liquidation price for each series in
the event of any liquidation, dissolution or winding up.
LIABILITY FOR ASSESSMENT
Outstanding shares of the common and serial preferred stock, including the
shares of stock to be sold by the Selling Shareholders hereunder, are fully
paid and non-assessable.
MANAGEMENT
The following is a list of Alco's directors and executive officers, their
ages and their positions for the last five years. Unless otherwise noted, such
positions are with Alco or its subsidiaries.
----------------
<TABLE>
<CAPTION>
NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
---- --- -------------------------------------------
<C> <C> <S>
Elisabeth H. Barrett............. 50 Vice President--Administrative Services (1995-
Present); Director--Administrative Services
(1994-1995); Director--Corporate MIS/HR (1992-
1993)
O. Gordon Brewer, Jr. ........... 59 Vice President--Finance (1986-Present)
J. Mahlon Buck, Jr. ............. 70 Director of Alco since 1984; Chairman and
President, TDH Capital Corporation (1977-
Present) (also a trustee of The Vanguard Real
Estate Funds Nos. I and II, Main Line Health,
Inc. and The Bryn Mawr Hospital)
Kathleen M. Burns................ 43 Vice President (1994-Present) and Treasurer
(1989-Present); Assistant Treasurer (1987-1989)
J. Kenneth Croney................ 53 Vice President (1983-Present), General Counsel
(1994-Present) and Secretary (1983-Present)
Paul J. Darling, II.............. 57 Director of Alco since 1994; Chairman, President
and Chief Executive Officer, Corey Steel Company
(1984-Present) (also a director of Liberty
Mutual Insurance Company, Liberty Mutual Fire
Insurance Company and Liberty Financial
Companies, Inc.)
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
---- --- -------------------------------------------
<C> <C> <S>
Stephen K. Deay.................. 48 Vice President--Tax (1993-Present); Director--
Taxes (1989-1993)
Michael J. Dillon................ 42 Vice President (1994-Present) and Controller
(1993-Present); Group Controller, Alco Office
Products (1991-1993); Associate Audit Director
(1991); Senior Audit Manager (1987-1991)
Kurt E. Dinkelacker.............. 42 Group President--Alco Office Products (1995-
Present) and Executive Vice President (1993-
Present); Chief Financial Officer (1993-1995);
Executive Vice President--Finance, Alco Office
Products (1989-1991); Group Controller, Alco
Office Products (1987-1989)
William F. Drake, Jr. ........... 63 Director of Alco since 1969; Attorney and
Partner, Montgomery, McCracken, Walker & Rhoads
(1984-Present); Vice Chairman (1984-Present)
(also a director of Nocopi Technologies, Inc.)
James J. Forese.................. 60 Director of Alco since 1994; General Manager,
IBM Customer Financing, and Chairman, IBM Credit
Corporation (1993-Present); IBM Vice President,
Finance (1990-1993); IBM Vice President and
Group Executive (1988-1990) (also a director of
Lexmark International, Inc., IBM Latin America,
American Management Systems, Inc. and NUI
Corporation)
Frederick S. Hammer.............. 59 Director of Alco since 1986; A director of
United Student Aid Group, Inc., Tri-Arc
Financial Services and National Media
Corporation; Partner, Inter-Atlantic Capital
Partners, Inc. (1994-Present); Chairman, Chief
Executive Officer and a director, Mutual of
America Capital Management Corporation (1993-
1994); President, SEI Asset Management Services
Group (1989-1993); Mazur Fellow, The Wharton
School, University of Pennsylvania (1989-1990)
Barbara Barnes Hauptfuhrer....... 67 Director of Alco since 1988; A director of The
Vanguard Group of Investment Companies and of
each of the mutual funds in the Group, The Great
Atlantic and Pacific Tea Co., Inc., Knight-
Ridder, Inc., Massachusetts Mutual Life
Insurance Co. and Raytheon Company
William T. Leith................. 48 Group President--Unisource and Vice President
(1995-Present); Executive Vice President--
Unisource; U.S. Operations (1994-1995);
President--PCA Central (1991-1994)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION (AND YEAR ELECTED OR YEARS SERVED)
---- --- -------------------------------------------
<C> <C> <S>
Dana G. Mead..................... 59 Director of Alco since 1994; Chairman and Chief
Executive Officer (1994-Present), President and
Chief Operating Officer (1992-1994) and a
director (1992-Present), Tenneco, Inc.; Chairman
(1992-Present), Case Corporation; Chairman
(1995-Present) and a director, National
Association of Manufacturers; Executive Vice
President (1989-1992), Senior Vice President
(1986-1989), International Paper Company (also a
director of National Westminster Bancorp,
Cummins Engine Company, Inc. and Baker Hughes
Incorporated)
Hugh G. Moulton.................. 62 Executive Vice President (1992-Present); General
Counsel (1979-1994); Senior Vice President--
Administration (1983-1992)
Ray B. Mundt..................... 67 Director of Alco since 1971; Chairman (1986-
1995); Chief Executive Officer (1980-1993);
President (1974-1988) (also a director of
Liberty Mutual Insurance Company, Liberty Mutual
Fire Insurance Company, Liberty Financial
Companies, Inc., Nocopi Technologies, Inc.,
CoreStates Bank, N.A., and Clark Equipment
Company)
Paul C. O'Neill.................. 69 Director of Alco since 1978; Private investor;
Chairman, Ovington Securities Ltd. (1989-1991)
Rogelio G. Sada.................. 60 Director of Alco since 1980; Private investor;
Mayor, San Pedro, N.L., Mexico (1992-1994);
Director, International Advisory Board of
Security Pacific National Bank (1980-1991);
Director General, VITRO, a glass and glass-
related products manufacturer in Mexico (1972-
1985)
James W. Stratton................ 59 Director of Alco since 1988; President, Stratton
Management Company (1972-Present); Chairman
(1993-Present) and a director, Stratton Small-
Cap Yield Fund; Chairman (1981-Present) and a
director, Stratton Monthly Dividend Shares;
Chairman (1972-Present) and a director, Stratton
Growth Fund (also a director of UGI Corporation,
Gilbert Associates and Teleflex)
John E. Stuart................... 51 Chairman (1995-Present); President and Chief
Executive Officer (1993-Present); Vice President
(1989-1993); Group President, Alco Office
Products (1985-1993)
Charles Tilden .................. 42 Vice President--Corporate Affairs (1994-
Present); Vice President--Communications,
Gencorp (1988-1994)
</TABLE>
All directors hold office until the election of successors by the
shareholders of Alco. All executive officers hold office at the pleasure of
the board of directors of Alco. Except for Mr. Buck, who is retiring this
year, all current directors will stand for reelection as directors at the 1996
Annual Meeting.
18
<PAGE>
SECURITY OWNERSHIP
As of November 24, 1995, shares of common stock of Alco were beneficially
owned (as determined by rules of the Securities and Exchange Commission,
although in certain cases the persons may disclaim beneficial ownership) by
the current directors, by each of the individuals named in the Summary
Compensation Table (on page 25) and by all current directors and executive
officers of Alco as a group, as follows:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
-----------------------------------------------
SOLE VOTING SHARED VOTING ACQUIRABLE
AND AND/OR WITHIN
INVESTMENT POWER INVESTMENT POWER(1) 60 DAYS(2)
---------------- ------------------- ----------
<S> <C> <C> <C>
J. Mahlon Buck, Jr. ....... 42,635 0 36,642
J. Kenneth Croney.......... 28,554 10,741 33,116
Paul J. Darling, II........ 286 0 4,638
William F. Drake, Jr....... 161,197 0 1,026
Kurt E. Dinkelacker........ 12,870 5,660 58,090
James J. Forese............ 6,290 0 4,638
Frederick S. Hammer........ 12,283 0 20,470
Barbara Barnes
Hauptfuhrer............... 3,557 0 26,562
James E. Head.............. 28,566 7,728 57,528
William T. Leith........... 18,262 3,299 22,887
Dana G. Mead............... 270 0 4,640
Hugh G. Moulton............ 51,000 39,863 80,608
Ray B. Mundt............... 287,878 50,468 5,898
Paul C. O'Neill............ 77,474 24,000 2,648
Rogelio G. Sada............ 12,738 0 31,422
James W. Stratton.......... 4,028 0 7,564
John E. Stuart............. 112,238 7,007 320,913
All current directors and
executive officers as a
group..................... 966,210 199,888 784,788
</TABLE>
--------
(1) Includes all shares held under Alco's Retirement Savings Plan and,
where applicable, shares owned by spouses or minor children.
(2) Represents shares which may be acquired within 60 days of November 24,
1995 through the exercise of stock options or vesting under Alco's
Partners' Stock Purchase Plan.
As of November 27, 1995, for each of the individuals named above, the
percentage of common stock beneficially owned was less than 1%. The percentage
of common stock beneficially owned by all current directors and executive
officers as a group was approximately 1.7%. As of November 27, 1995, no person
beneficially owned more than 5% of the outstanding shares of common stock of
Alco, nor did any director, nominee or executive officer of Alco own any
shares of preferred stock of Alco. As of November 27, 1995, Alco employees,
through direct ownership or employee benefit plans, owned approximately 15% of
the outstanding shares of common stock of Alco.
For the fiscal year ended September 30, 1995, all reports required to be
filed by Section 16(a) of the Securities Exchange Act of 1934 on behalf of
Alco's directors and officers to reflect changes in beneficial ownership of
Alco's securities were timely filed.
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
There are four standing committees of the Board of Directors, including the
Audit Committee and the Human Resources Committee. Between meetings of the
Board of Directors, its powers may be exercised by the Executive Committee,
Human Resources Committee and Investment Committee, and they, as well as the
Board of Directors, sometimes act by unanimous written consent.
19
<PAGE>
The Audit Committee (Messrs. Buck, Darling, Sada, and Stratton) met four
times during the fiscal year ended September 30, 1995. Its functions are to
review the report of Alco's independent auditors relating to their audit of
the financial statements of Alco, to review and discuss internal financial
controls with both the independent auditors and internal auditors, and to
direct that special studies relating to the adequacy of financial controls and
accounting procedures be made from time to time as the Committee deems
desirable.
The Human Resources Committee (Mrs. Hauptfuhrer and Messrs. Buck, Darling,
Hammer, Mead and Sada) met six times during the fiscal year. It is responsible
for reviewing and evaluating persons who are suggested as nominees for
election as members of the Board of Directors, and for making recommendations
to the Board of Directors concerning such nominees. The Human Resources
Committee is also responsible for setting policies regarding executive
compensation and for determining the salaries and other compensation of
each of the executive officers of Alco. The Committee also has all of the
powers and exercises all of the duties of the Board of Directors as described
in Alco's stock option, stock purchase, deferred compensation and other
similar plans.
During the fiscal year, the Board of Directors met six times. Each director
attended at least 75% of the total number of the meetings of the Board of
Directors and the meetings of all committees on which he or she served, except
Mr. Mead, who attended 69% of such meetings.
20
<PAGE>
EXECUTIVE COMPENSATION
Alco's executive compensation program is administered by the Human Resources
Committee of the Board of Directors, which has responsibility for all aspects
of the compensation program for the executive officers of Alco. The Human
Resources Committee (the "Committee") is comprised of six directors, none of
whom is an employee of Alco and each of whom qualifies as a disinterested
person for the purpose of Rule 16b-3 under the Securities Exchange Act of 1934
and an outside director for purposes of Section 162(m) of the Internal Revenue
Code (the "Code").
The Committee's primary objective is to establish and administer programs
which attract and retain key executives, and to align their compensation with
Alco's performance, business strategies and growth in shareholder value. To
this end, the Committee has established and the Board of Directors has
endorsed an executive compensation philosophy which includes the following
elements:
--A "pay-for-performance" orientation under which compensation reflects
corporate, business unit and individual performance;
--An emphasis on stock incentives to closely align the interest of
executives with the long-term interests of shareholders;
--An emphasis on total compensation under which base salaries are generally
set at or near competitive levels but which motivates and rewards executives
with total compensation, including incentive programs, at or above competitive
levels if corporate or individual performance is superior;
--An appropriate balance of short and long-term compensation which
facilitates retention of talented executives, rewards long-term strategic
planning, and encourages Alco stock ownership; and
--Recognition that as an executive's level of responsibility increases, a
greater portion of the total compensation opportunity should be based on stock
and other performance incentives and less on salary and benefits.
As a matter of policy, the Committee recommends that its executive
compensation plans be structured so that payments under such plans will be
excluded from compensation subject to the $1,000,000 deduction limit of
Section 162(m) of the Code.
The primary components of Alco's executive compensation program are (a) base
salaries; (b) annual cash bonus opportunities; and (c) long term incentive
opportunities.
BASE SALARIES
Base salaries for executive officers are reviewed annually and are subject
to adjustment on the basis of individual, corporate, and business unit
performance, as well as competitive, inflationary and internal equity
considerations. Base salaries generally are fixed at or near the 50th
percentile of predicted executive salaries paid by comparable companies based
upon survey data compiled by Alco's compensation consultant. The Committee
does not consider the market for determining the compensation of Alco's
executives to be limited to the companies included in the industry performance
graph on page 4. The companies considered to be comparable to Alco for
compensation purposes include a broad cross-section of companies which are
representative of industry generally.
In setting the $850,000 base salary of Mr. Stuart as Chief Executive Officer
(for fiscal 1995), the Committee evaluated the factors described above which
are used for setting compensation generally, as well as Mr. Stuart's strong
record and leadership abilities as President and Chief Executive Officer of
Alco during fiscal 1994, including growth in Alco's revenues of 24% and growth
in Alco's operating income of 31% in fiscal 1994 compared with fiscal 1993.
21
<PAGE>
ANNUAL BONUS
Annual bonus payments to executive officers are awarded pursuant to the Alco
Standard Corporation Annual Bonus Plan, and are based on corporate or business
unit performance compared to the targets established for the year. These
annual bonus payments are in amounts equal to a percentage of base salary.
They generally range from 0% for threshold, 30-50% for target, and 60-100% for
maximum performance. For the individuals named in the Summary Compensation
Table, annual bonus potential (as a percentage of base salary) is 0% for
threshold, 45%-50% for target and 90%-100% for maximum performance. For
performance between threshold and maximum levels, bonus awards are prorated on
a straight line basis. For corporate officers, targets for fiscal 1995 were
based upon growth in "economic value per share," a concept which measures
growth in economic value under a financial model which Alco utilizes. As used
in this model, "economic value" reflects the results of the performance
factors and investment variables which are within management's control. It
disregards macro-economic factors such as interest rates and taxes which also
affect market prices for Alco's stock. As a result, changes in "economic value
per share" may not be accompanied by corresponding increases or decreases in
stock prices over the measurement period. For fiscal 1995, the annual bonus
plan for corporate officers was based on increases in economic value per share
over this value at the end of fiscal 1994. The threshold, target and maximum
increases were fixed at 15%, 18% and 20%, respectively. For fiscal 1995, Alco
achieved growth in economic value per share of 27.3% over this value at the
end of fiscal 1994. Because of this performance, Messrs. Stuart, Dinkelacker,
Moulton and Croney received bonuses at the maximum level.
For officers of Unisource, annual bonus targets were based on increases in
operating income and growth in Unisource's "economic value" compared to
targets established for the year (determined by applying the same financial
model Alco utilizes to determine "economic value per share"). For fiscal 1995,
Unisource achieved operating income of $225 million compared to a $210 million
target, and achieved growth in economic value of 19% compared to a 17% target.
Because of this performance, Mr. Leith received a bonus at the maximum level.
For officers of AOP, annual bonus targets for fiscal 1995 were based on
increases in operating income and operating cash flow compared to the targets
established for the year. For fiscal 1995, AOP achieved operating income of
$251.8 million compared to a $237.7 million target, and operating cash flow of
$274.7 million compared to a $220.6 million target. Because of this
performance, Mr. Head received a bonus at the maximum level.
LONG TERM INCENTIVE COMPENSATION
LTIP Awards
The Alco Standard Corporation Long Term Incentive Compensation Plan ("LTIP")
is intended to align the long-term interests of Alco's executives with those
of Alco's shareholders. The LTIP motivates and rewards growth in shareholder
value by granting to eligible executives awards which vest only if certain
performance criteria are met. For corporate officers, the LTIP is based on
total shareholder return (stock price appreciation and dividends) compared
with the total shareholder return of the Standard & Poor's 500 Stock Index
(the "S&P 500"). Awards granted under the LTIP for corporate officers will not
vest unless growth in Alco's shareholder value exceeds the S&P 500 total
shareholder return over the plan period. Total shareholder return is measured
over successive three-year periods (with a new three-year period beginning
every fiscal year) and awards, if vested, will be paid at the end of each such
three-year period. The LTIP payout is dependent upon achievement of
performance targets, ranging from 0 (in the case of performance at or below
threshold) to 100% of the participant's base salary at the beginning of the
plan period (for maximum performance). For performance between threshold and
maximum, the payout will be prorated on a straight-line basis.
For the three-year plan period ending September 30, 1995, LTIP awards, to
the extent vested, were paid in shares of Alco common stock, with the maximum
number of shares determined by dividing an amount not exceeding 100% of the
participant's base salary at the beginning of the plan period by the price of
Alco common stock on September 30, 1992.
22
<PAGE>
In November 1995, the Committee evaluated whether the corporation and
respective business groups had met the criteria for payment of LTIP awards for
the 1993-1995 plan period. For corporate officers, the September 30, 1995
value of a $100 investment made on September 30, 1992 in the S&P 500 (with
dividends reinvested) was compared to the value of a similar investment in
Alco common stock. In order for corporate officers to earn a maximum award,
the value of the Alco common stock investment must have exceeded the value of
the S&P investment at the end of the period by 20%. In fact, the Alco common
stock investment exceeded the S&P 500 investment by 67.7%. For group officers,
performance targets were based on compound growth in the economic value and
cash flow of the relevant business unit as determined under Alco's shareholder
value model ("Total Shareholder Return" or "TSR"). The TSR targets for the
1993-1995 plan period were 12.87% for threshold performance, 15.42% for target
performance and 17.86% for maximum performance. AOP achieved a three year TSR
of 27.82% and Unisource achieved a three-year TSR of 13.58%. Because of the
corporate and AOP performance during the 1993-1995 plan period, Messrs.
Stuart, Dinkelacker, Moulton, Croney and Head received LTIP payouts at the
maximum levels. Mr. Leith's award was based two-thirds on Unisource's Central
Region, which achieved a three-year TSR of 17.95% and one-third on Unisource,
which achieved a three-year TSR of 13.58%. Therefore, Mr. Leith received an
LTIP payout of 68.8% of the maximum level.
Stock Options
Stock options are granted under the corporation's stock option plans as a
reward for past performance and as motivation for future performance which
maximizes shareholder value. Stock options are generally granted for ten-year
terms and vest over a five-year employment period. The exercise price of these
stock options is the fair market value of Alco stock on the date of grant.
In fiscal 1995, Mr. Leith's receipt of an option to purchase 50,000 shares
reflected his promotion to the position of Vice President, and Mr. Croney's
receipt of an option to purchase 10,000 shares reflected his promotion to
General Counsel of Alco during fiscal 1994. The option grants took into
consideration outstanding awards and were at the fair market value on the
dates of the grants.
23
<PAGE>
SUMMARY OF EXECUTIVE COMPENSATION
The following table provides a summary of all compensation for the five most
highly compensated officers of Alco (and one additional former officer) during
the fiscal years ended September 30, 1995, 1994 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
- -------------------------------------------------------------------------------
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------- ----------------------------------
AWARDS(2)
----------
NAME ALL OTHER
AND SECURITIES COMPEN-
PRINCIPAL FISCAL UNDERLYING SATION LTIP
POSITION(1) YEAR SALARY($) BONUS($) OPTIONS ($)(3) PAYOUTS($)(4)
----------- ------ ---------- --------- ---------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Stu- 1995 850,000 850,000 0 253,427 826,821
art 1994 700,000 700,000 500,000 177,642 0
Chairman, 1993 393,750 350,000 1,000 100,533 0
President
and
Chief Exec-
utive Offi-
cer
Kurt E.
Dinkelacker 1995 350,000 350,000 0 102,980 354,340
Executive 1994 300,000 300,000 100,000 74,806 0
Vice Presi- 1993 168,750 150,000 0 42,066 0
dent and
Alco Office
Products
Group Pres-
ident
Hugh G. 1995 312,000 312,000 0 137,029 708,680
Moulton 1994 300,000 300,000 0 78,136 0
Executive 1993 300,000 0 40,000 34,097 0
Vice Presi-
dent
J. Kenneth 1995 245,000 220,500 10,000 56,178 347,306
Croney 1994 222,000 176,000 0 35,762 0
Vice 1993 210,000 0 0 13,945 0
President,
General
Counsel and
Secretary
William T. 1995 383,333 479,167 50,000 117,831 448,412
Leith 1994 288,003 266,656 50,000 69,246 0
Vice Presi- 1993 274,257 50,312 0 23,768 0
dent and
Unisource
Group
President
James E. 1995 325,000 325,000 0 82,121 366,205
Head 1994 300,000 300,000 100,000 80,954 0
Former Vice 1993 167,083 177,535 0 46,098 0
President
and
Alco Office
Products
Group Pres-
ident
</TABLE>
- --------
(1) In August 1995, Mr. Dinkelacker, who had been serving as Chief Financial
Officer and Executive Vice President of Alco, was named Group President of
AOP. In January 1995, Mr. Leith, who had been serving as Executive Vice
President of Unisource's U.S. operations (and who had previously served as
President of the Central Region of Unisource), became Group President of
Unisource and a vice president of Alco. In March 1995, Mr. Head resigned
his position as Group President of AOP. For fiscal 1995, Mr. Head was paid
the amounts set forth above. In consideration of his consulting services
and covenant not to compete, Mr. Head will receive payments through 1998
totalling $690,625. Subject to the requirement that AOP achieve its LTIP
performance goals for the relevant plan periods, Mr. Head is also eligible
to receive cash LTIP payouts equivalent to a maximum of 9,090 shares of
Alco common stock (valued at 9/30/96) in 1996 and a maximum of 3,488
shares of Alco common stock (valued at 9/30/97) in 1997.
(2) Does not include LTIP awards, which will only vest if certain performance
goals are met. LTIP awards made during fiscal 1995 are included in the
LTIP Awards Table on page 10.
(3) Includes the value of shares of Alco common stock purchased with matching
company contributions under Alco's stock purchase plans, calculated as of
the date of purchase, as follows: John E. Stuart--$247,967 (1995),
$176,356 (1994) and $99,703 (1993); Kurt E. Dinkelacker--$101,761 (1995),
$74,528 (1994) and
24
<PAGE>
$41,884 (1993); Hugh G. Moulton--$92,447 (1995), $69,374 (1994) and $27,367
(1993); J. Kenneth Croney--$51,784 (1995), $32,591 (1994) and $11,865
(1993); William T. Leith--$115,337 (1995), $67,446 (1994) and $22,588
(1993); James E. Head--$82,121 (1995), $80,954 (1994) and $46,098 (1993).
The remaining amounts represent above-market interest earned on deferred
compensation.
(4) There were no LTIP payouts in fiscal 1994 or 1993. The LTIP payouts for the
1993-1995 plan period were distributed in October 1995 in the form of
shares of Alco common stock. The values above are based on the fair market
value of Alco common stock on September 30, 1995, the last day of the plan
period.
OPTION GRANTS
The following table shows option grants to the six individuals named in the
Summary Compensation Table during the fiscal year ended September 30, 1995:
OPTION GRANTS IN LAST FISCAL YEAR(1)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OPTIONS
OF SECURITIES GRANTED TO EXERCISE GRANT
UNDERLYING EMPLOYEES OR BASE DATE
OPTIONS IN FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED (#) YEAR (%) ($/SH) DATE VALUE ($)(2)
---- ------------- ---------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C>
John E. Stuart..... -- -- -- -- --
Kurt E.
Dinkelacker....... -- -- -- -- --
Hugh G. Moulton.... -- -- -- -- --
J. Kenneth Croney.. 10,000 1.3 28.81 11/10/04 73,900
William T. Leith... 50,000 6.6 32.75 1/26/05 438,250
James E. Head...... -- -- -- -- --
</TABLE>
(1) All stock options were granted at an exercise price equal to fair market
value of Alco common stock on date of grant, and become exercisable 20% per
year from the date of grant.
(2) The present value of the option grant to Mr. Croney was calculated using
Black-Scholes option valuation methodology, based on the following
assumptions: (a) ten-year option term; (b) becomes exercisable 20% per year
from date of grant; (c) 7.96% expected risk-free rate of return; (d) 16.42%
expected volatility; and (e) 1.74% expected dividend yield. The present
value of the option grant to Mr. Leith was also calculated using the Black-
Scholes option valuation methodology, based upon the following assumptions:
(a) ten-year option term; (b) becomes exercisable 20% per year from date of
grant; (c) 7.78% expected risk-free rate of return; (d) 17.34% expected
volatility; and (e) 1.53% expected dividend yield.
25
<PAGE>
OPTION EXERCISES
The following table shows option exercises for each of the six individuals
named in the Summary Compensation Table for the fiscal year ended September
30, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF VALUE OF
SECURITIES SECURITIES UNEXERCISED VALUE OF
UNDERLYING UNDERLYING IN-THE- UNEXERCISED
SHARES UNEXERCISED UNEXERCISED MONEY IN-THE-MONEY
ACQUIRED OPTIONS AT OPTIONS AT OPTIONS AT OPTIONS AT
ON VALUE FY-END FY-END FY-END FY-END
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($)/(1) ($)/(1)
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John E. Stuart.......... 9,280 $151,200 232,200 419,320 $5,512,328 $7,662,110
Kurt E. Dinkelacker..... 14,900 287,831 34,480 87,320 742,665 1,625,885
Hugh G. Moulton......... -- -- 66,680 36,120 1,750,303 917,985
J. Kenneth Croney....... -- -- 36,000 16,520 1,042,450 309,610
William T. Leith........ -- -- 19,600 94,500 365,350 1,055,288
James E. Head........... -- -- 46,400 86,100 1,084,825 1,592,988
</TABLE>
(1) Value of unexercised options equals fair market value of Alco common stock
as of September 30, 1995, less exercise price, multiplied by the number of
shares underlying the stock options.
LONG TERM INCENTIVE COMPENSATION PLAN
The following table shows the LTIP awards granted to each of the named
individuals under the Long Term Incentive Compensation Plan during the fiscal
year ended September 30, 1995 and the number of shares of Alco common stock
which will become issuable after fiscal 1997 upon attainment of threshold,
target and maximum performance levels:
LONG TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERFORMANCE ESTIMATED FUTURE
NUMBER OF OR OTHER PAYOUTS (SHARES OF
SHARES, UNITS PERIOD UNTIL COMMON STOCK) (#)(2)
OR OTHER MATURATION OR --------------------
NAME RIGHTS (#)(1) PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- --------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
John E. Stuart........ 27,364 10/1/94-9/30/97 0 13,682 27,364
Kurt E. Dinkelacker... 11,268 10/1/94-9/30/97 0 5,634 11,268
Hugh G. Moulton....... 10,044 10/1/94-9/30/97 0 5,022 10,044
J. Kenneth Croney..... 7,888 10/1/94-9/30/97 0 3,944 7,888
William T. Leith...... 11,268 10/1/94-9/30/97 0 5,634 11,268
James E. Head(3)...... 3,488 10/1/94-9/30/97 0 1,744 3,488
</TABLE>
(1) Represents the number of stock awards granted, which, if vested, will
entitle the participant to receive shares of common stock.
(2) Represents the number of shares of common stock which will be received
upon attainment of threshold, target and maximum performance. For
performance between threshold and maximum, the number of shares to be
received will be prorated on a straight-line basis.
(3) Reflects a reduced award based upon services performed by Mr. Head prior
to his resignation as an executive officer in March 1995. Any LTIP payouts
to Mr. Head will be in the form of cash based on the fair market value (on
the last day of the plan period) of the number of shares earned.
26
<PAGE>
PENSION PLAN AND SUPPLEMENTAL RETIREMENT PLANS
Certain executive officers of Alco (including Messrs. Stuart, Dinkelacker,
Moulton, Croney, Leith and Head) are participants in a pension plan (the
"pension plan") for salaried employees which provides to eligible retired
employees at age 65 annual pension benefits equal to the number of years of
credited service multiplied by 1% of average annual compensation earned during
the three consecutive years within the employee's last ten years of
participation in the pension plan which yield the highest average. All pension
plan costs are paid by Alco and the pension plan and benefits are funded on an
actuarial basis. The years of credited service as of September 30, 1995 for
the individuals named in the Summary Compensation Table were: John E. Stuart--
9.9 years; Kurt E. Dinkelacker--10.3 years; Hugh G. Moulton--24.9 years; J.
Kenneth Croney--21.3 years; William T. Leith--3.6 years; and James E. Head--
5.0 years. In addition, Mr Leith has earned a past service benefit from his
former company (which was acquired by Alco in 1990) which entitles him to
receive a single life annuity of $1,738 per month beginning at age 65.
Alco also has a Supplemental Executive Retirement Plan ("SERP"). Coverage
under the SERP is limited to participants in the Alco pension plan who are not
commissioned sales employees and whose benefits under the pension plan are
limited because of (a) restrictions imposed by the Code on the amount of
benefits which may be paid from a tax-qualified plan, (b) restrictions imposed
by the Code on the amount of an employee's compensation that may be taken into
account in calculating benefits to be paid from a tax-qualified plan, or (c)
any reductions in the amount of compensation taken into account under the
pension plan because of an employee's participation in certain deferred
compensation plans sponsored by Alco or one of its subsidiaries. The SERP
provides for a supplement to the annual pension paid under the pension plan to
participants who attain early or normal retirement under the pension plan or
who suffer a total and permanent disability while employed by Alco or one of
its subsidiaries and to the pre-retirement death benefits payable under the
pension plan on behalf of such participants who die with a vested interest in
the pension plan. The amount of the supplement will be the difference, if any,
between the pension or pre-retirement death benefit paid under the pension
plan and that which would otherwise have been payable but for the restrictions
imposed by the Code and any reduction in the participant's compensation for
purposes of the pension plan because of his participation in certain deferred
compensation plans of Alco or one of its subsidiaries. The maximum amount of
annual compensation upon which such supplement may be based is $500,000 per
participant.
The following table shows estimated annual retirement benefits that would be
payable to participants under Alco's pension plan and, if applicable, the
SERP, upon normal retirement at age 65 under various assumptions as to final
average annual compensation and years of credited service and on the
assumption that benefits will be paid in the form of a single life annuity.
The benefits are not subject to any deduction for Social Security benefits.
<TABLE>
<CAPTION>
ESTIMATED ANNUAL RETIREMENT BENEFITS
-----------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
FINAL AVERAGE -------------------------------------------
COMPENSATION 5 10 20 30 35
------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000......................... $10,000 $ 20,000 $ 40,000 $ 60,000 $ 70,000
250,000......................... 12,500 25,000 50,000 75,000 87,500
300,000......................... 15,000 30,000 60,000 90,000 105,000
400,000......................... 20,000 40,000 80,000 120,000 140,000
500,000 or above................ 25,000 50,000 100,000 150,000 175,000
</TABLE>
Covered compensation under the pension plan and SERP of each of the named
individuals includes salary and bonus as set forth in the Summary Compensation
Table.
DIRECTORS' COMPENSATION
All independent directors are entitled to receive fees of $25,000 per year
for service on the Board of Directors and committees thereof, and attendance
fees of $1,000 for each board and committee meeting attended. Committee
members also receive $3,000 per committee per year and committee chairmen
receive $3,000 per
27
<PAGE>
chairmanship per year. In addition, independent directors who serve as
trustees for Alco's employee benefit plans receive $3,000 per year for
services rendered to the plans, $3,000 per year for trustee chairmanship, and
attendance fees of $1,000 for each trustees' meeting attended. In addition,
Mrs. Hauptfuhrer, who has been a member of the Board since 1988, is entitled
to receive $25,000 per year for her services as Chairman of the Independent
Directors. In this newly created position, Mrs. Hauptfuhrer coordinates an
annual evaluation of the performance of the Chief Executive Officer and holds
periodic meetings of the independent directors.
Certain directors have elected to receive a portion of their directors' fees
(excluding attendance fees) in the form of options to purchase Alco common
stock, pursuant to the terms of Alco's 1989 Directors' Stock Option Plan,
which enables directors of Alco to receive all or a portion of their
directors' fees in the form of options to purchase Alco common stock at
exercise prices equal to 75% of the fair market value on the date such options
are granted. The Directors' Plan provides for an automatic annual grant of
stock options to each director who has filed with Alco an election to receive
such options in lieu of all or a portion of his or her board, committee and
trustee fees. The options are exercisable for twenty years (except in the case
of death), but generally may not be exercised prior to the twelve-month
anniversary of the date of grant.
In addition to the above amounts, each independent director receives an
annual grant of options to purchase 800 shares of Alco common stock pursuant
to the 1993 Stock Option Plan for Non-Employee Directors. Options are granted
at an exercise price equal to the fair market value of Alco common stock on
the date of grant. Options are immediately exercisable and remain exercisable
for a period of ten years from the date of grant.
Independent directors who complete at least five full years of service as a
director and who are not otherwise entitled to receive a pension benefit from
Alco are entitled to receive a monthly retirement benefit after retiring from
Alco's Board of Directors. Payment of such benefit begins upon the later of
the director's 70th birthday or his or her separation from service on the
Board of Directors. The amount of such monthly benefit is equal to one-twelfth
of the annual retainer in effect for such director (excluding committee fees,
chairmanship fees, trustee fees and attendance fees) immediately preceding his
or her separation from service on the Board of Directors. Payment of the
monthly retirement benefit ceases upon the director's death.
CERTAIN TRANSACTIONS
Alco has adopted a loan program which encourages persons designated as
"partners" to purchase and retain Alco stock. It offers to make loans to
partners with the requirement that the loan be secured by the borrower's
pledge of Alco stock having a value at the time of the loan of not less than
twice the amount of the loan. The loans are payable upon demand and bear
interest at an annual rate of 6%. As of November 27, 1995, loans were
outstanding to 37 partners in an aggregate amount of approximately $4.5
million. From October 1, 1994 to November 27, 1995, the indebtedness of the
following individuals and groups under the loan program was as follows:
<TABLE>
<CAPTION>
LARGEST AMOUNT OUTSTANDING AMOUNT OUTSTANDING AT
NAME OR GROUP DURING PERIOD($) NOVEMBER 27, 1995($)
- -------------------------------------------------------------------------------
<S> <C> <C>
John E. Stuart.............. 713,000 713,000
Kurt E. Dinkelacker......... 233,000 233,000
Hugh G. Moulton............. 530,000 300,000
J. Kenneth Croney........... 269,000 229,000
William T. Leith............ 224,000 224,000
James E. Head............... 180,000 0
All current directors and
executive officers
as a group................. 2,649,000 2,199,000
</TABLE>
Mr. Drake, who serves as Vice Chairman and a director of Alco, is a partner
in the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, which
rendered legal services to Alco and its subsidiaries during the 1995 fiscal
year, and is expected to continue performing legal services during fiscal
1996.
28
<PAGE>
PLAN OF DISTRIBUTION
Shares of common stock will be offered in connection with Alco's (or a
subsidiary's) acquisition of businesses and properties from time to time. A
maximum of 10,000,000 shares of common stock may be sold pursuant to this
prospectus. These shares will ordinarily represent consideration paid directly
upon the acquisition of businesses or properties. The shares may also include
shares to be delivered upon the exercise or satisfaction of conversion or
purchase rights which are created in connection with acquisitions or which
were previously created or assumed by the companies whose businesses or
properties were acquired by Alco (or a subsidiary).
RESALES
Shares offered hereby may generally be resold by the persons acquiring them
without further registration under the Securities Act of 1933 (the "Act"),
unless such persons are "affiliates" or "underwriters" within the meaning of
the Act.
Any person receiving shares offered hereby who is an "affiliate" of Alco may
be subject to certain limitations on resale. An "affiliate" is a person who
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with the Company. In the absence of
a special relationship between Alco and a person who receives shares from Alco
in an acquisition transaction (such as election of such person to Alco's board
of directors or ownership by such person of a significant percentage of Alco's
outstanding common stock), such a person generally would not be considered an
"affiliate" of Alco within the meaning of the Act. Therefore, the limitations
on resale applicable to affiliates would not apply to such person.
Any person receiving shares offered hereby who is an "underwriter" of Alco
may also be subject to certain limitations upon resale. An "underwriter"
includes a person who purchases Alco shares with a view to the distribution of
such shares. Although an "underwriter" may otherwise be subject to certain
resale limitations, if such person complies with the "safe harbor" provisions
of Rule 145(d), he or she may freely resell shares so long as certain
conditions are met. For example, a person who receives common shares from Alco
in a typical acquisition transaction is deemed to be an "underwriter" as
defined by the Act, but such person is generally free to sell such shares at
any time by complying with Rule 145(d), which requires that the amount of
common shares which may be sold by such person in any three-month period may
not exceed the greater of (i) 1% of the Alco common shares outstanding as
shown by the most recent report or statement published by Alco, or (ii) the
average weekly trading volume in Alco common shares reported on the Composite
Tape during the four calendar weeks preceding the order to sell. Such sales
must also be made in "brokers' transactions," which are ordinary sales through
a broker acting as agent without special commission arrangements or selling
efforts.
In order for affiliates or underwriters not protected by Rule 145(d) to
resell shares offered hereby, Alco would have to agree 1) to provide an
opinion to the effect that an exemption applies to such resale, 2) to amend
the registration statement of which this prospectus is a part to permit such
resales, or 3) to file a new registration statement which includes the shares
proposed to be resold. Unless a written agreement obligates Alco to do so,
there is no assurance that it will agree to provide such opinion, amendment or
registration.
USE OF PROCEEDS
The proceeds of the sale of shares offered hereby, to the extent such
proceeds consist of the assets of acquired businesses, will be added to the
assets of Alco. Cash proceeds, if any, will be added to the general funds of
Alco and may be used for general corporate purposes, including capital
expenditures and working capital requirements.
29
<PAGE>
LEGAL OPINIONS
Legal matters in connection with the stock offered hereby have been, or
prior to issue or delivery will be, passed upon by Ballard Spahr Andrews &
Ingersoll.
EXPERTS
The consolidated financial statements of Alco Standard Corporation at
September 30, 1995 and 1994, and for each of the three years in the period
ended September 30, 1995, appearing in this prospectus and Registration
Statement have been audited by Ernst & Young LLP, independent auditors, as set
forth in their reports thereon appearing elsewhere herein and in the
Registration Statement, and are included in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Alco Standard Corporation is responsible for the
preparation and presentation of the financial statements and related financial
information included in this annual report. The financial statements include
amounts that are based on management's best estimates and judgements. These
statements have been prepared in conformity with generally accepted accounting
principles consistently applied and have been audited by Ernst & Young LLP,
independent auditors.
Management is also responsible for maintaining systems of internal
accounting controls that are designed to provide reasonable assurance as to
the integrity of the financial records and the protection of corporate assets.
Alco Standard Corporation supports an active program of auditing to monitor
the proper functioning of its systems. The reports issued by the Alco Audit
Department, as well as comment letters from Ernst & Young LLP, are reviewed
regularly by the Audit Committee of the Board of Directors, which is composed
of four directors who are not employees of the Company. The Audit Committee
meets periodically with Ernst & Young LLP, the Alco Audit Department and
management to review audit scope, timing and results.
30
<PAGE>
REPORT OF ERNST & YOUNG LLP, 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, 1995 and 1994, 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, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements 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 are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement 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, 1995 and 1994,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended September 30, 1995, in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 17, 1995,
except for the stock
split described in note
1, as to which the date
is November 9, 1995
31
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FISCAL YEAR ENDED SEPTEMBER 30 (IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Net sales............................... $9,794,186 $7,925,784 $6,387,078
Dividends, interest and other income.... 4,621 3,537 6,332
Finance subsidiaries (note 12).......... 93,019 66,731 51,149
---------- ---------- ----------
9,891,826 7,996,052 6,444,559
---------- ---------- ----------
COSTS AND EXPENSES
Cost of goods sold...................... 7,326,721 5,884,819 4,799,757
Selling and administrative.............. 2,109,148 1,765,483 1,378,814
Interest................................ 55,838 43,802 40,189
Finance subsidiaries interest (note
12).................................... 40,216 27,978 23,662
Restructuring costs (note 15)........... 175,000
---------- ---------- ----------
9,531,923 7,722,082 6,417,422
---------- ---------- ----------
LOSS FROM UNCONSOLIDATED AFFILIATE (note
4)....................................... (117,158) (2,538)
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS BEFORE
TAXES.................................... 359,903 156,812 24,599
TAXES ON INCOME (note 7).................. 140,630 86,203 16,984
---------- ---------- ----------
INCOME FROM CONTINUING OPERATIONS......... 219,273 70,609 7,615
LOSS FROM DISCONTINUED OPERATIONS, net of
taxes (note 2)........................... (16,541) (7,515)
---------- ---------- ----------
NET INCOME................................ 202,732 70,609 100
PREFERRED DIVIDENDS (note 6).............. 15,209 11,572 9,571
---------- ---------- ----------
NET INCOME (LOSS) AVAILABLE TO COMMON
SHAREHOLDERS............................. $ 187,523 $ 59,037 $ (9,471)
========== ========== ==========
EARNINGS (LOSS) PER SHARE (note 1)
Continuing operations................... $ 1.81 $ .55 $ (.02)
Discontinued operations................. (.14) (.08)
---------- ---------- ----------
$ 1.67 $ .55 $ (.10)
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
32
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................... $ 90,106 $ 53,369
Accounts receivable, less allowance for doubtful
accounts:
1995--$48,628; 1994--$29,428 (note 13)................. 1,175,699 915,495
Inventories (note 1)................................... 747,895 609,974
Prepaid expenses and deferred taxes.................... 146,867 131,638
---------- ----------
Total current assets................................. 2,160,567 1,710,476
---------- ----------
OTHER INVESTMENTS AND LONG-TERM RECEIVABLES.............. 56,086 68,472
PROPERTY AND EQUIPMENT, at cost (note 5)
Land................................................... 30,717 29,308
Buildings and improvements............................. 225,011 213,037
Machinery and equipment................................ 489,507 411,377
---------- ----------
745,235 653,722
Less accumulated depreciation.......................... 375,285 299,775
---------- ----------
369,950 353,947
---------- ----------
OTHER ASSETS
Goodwill (note 1)...................................... 1,058,214 747,629
Miscellaneous.......................................... 109,436 59,331
---------- ----------
1,167,650 806,960
---------- ----------
FINANCE SUBSIDIARIES ASSETS (note 12).................... 983,322 562,403
---------- ----------
$4,737,575 $3,502,258
========== ==========
</TABLE>
See notes to consolidated financial statements.
33
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt.................... $ 26,319 $ 12,299
Notes payable (note 5)............................... 280,832 91,999
Trade accounts payable............................... 501,316 500,166
Accrued salaries, wages and commissions.............. 115,874 96,987
Deferred revenues.................................... 172,900 134,485
Restructuring costs (note 15)........................ 33,302 56,971
Other accrued expenses............................... 259,534 164,023
---------- ----------
Total current liabilities.......................... 1,390,077 1,056,930
---------- ----------
LONG-TERM DEBT (note 5)................................ 325,314 340,771
DEFERRED TAXES AND OTHER LIABILITIES
Deferred taxes....................................... 96,082 32,192
Restructuring costs (note 15)........................ 6,000 50,000
Other long-term liabilities.......................... 178,782 156,511
---------- ----------
280,864 238,703
---------- ----------
FINANCE SUBSIDIARIES LIABILITIES (note 12)............. 872,783 498,710
SHAREHOLDERS' EQUITY (note 6)
Series AA convertible preferred stock, no par value:
4,025,000 depositary shares issued and outstanding.. 201,924 199,912
Series BB conversion preferred stock, no par value:
3,877,200 depositary shares issued and outstanding.. 290,152
Common stock, no par value: authorized 150,000,000
shares;
issued 1995--112,182,000 shares; 1994--109,044,000
shares.............................................. 637,414 551,215
Retained earnings.................................... 765,309 642,634
Foreign currency translation adjustment.............. (21,536) (22,550)
Cost of common shares in treasury: 1995--118,000
shares;
1994--148,000 shares................................ (4,726) (4,067)
---------- ----------
1,868,537 1,367,144
---------- ----------
$4,737,575 $3,502,258
========== ==========
</TABLE>
See notes to consolidated financial statements.
34
<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>
1995 1994 1993
----------------- ----------------- ----------------
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
------- -------- ------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
SERIES AA CONVERTIBLE
PREFERRED STOCK
Balance, beginning of
year................. 4,025 $199,912 4,025 $197,900
Issued in public
offering............. 4,025 $196,335
Dividend accretion.... 2,012 2,012 1,565
------- -------- ------- -------- ------ --------
Balance, end of year.. 4,025 $201,924 4,025 $199,912 4,025 $197,900
======= ======== ======= ======== ====== ========
SERIES BB CONVERSION
PREFERRED STOCK
Issued in public
offering............. 3,877 $290,152
------- --------
Balance, end of year.. 3,877 $290,152
======= ========
COMMON STOCK
Balance, beginning of
year................. 109,044 $551,215 97,544 $259,031 97,544 $257,069
Issued in public
offering............. 11,500 293,500
Mergers, acquisitions
and other............ 3,138 81,478 (4,104)
Tax benefit relating
to stock plans....... 4,721 2,788 1,962
------- -------- ------- -------- ------ --------
Balance, end of year.. 112,182 $637,414 109,044 $551,215 97,544 $259,031
======= ======== ======= ======== ====== ========
RETAINED EARNINGS
Balance, beginning of
year................. $642,634 $651,373 $699,015
Net income............ 202,732 70,609 100
Cash dividends
declared:
Series AA preferred
stock, per share:
1995--$2.875;
1994--$2.875;
1993--$2.236....... (11,572) (11,572) (9,571)
Series BB preferred
stock, per share:
1995--$.938........ (3,637)
Common stock, per
share: 1995--$.52;
1994--$.50; 1993--
$.48............... (57,267) (52,222) (44,858)
Pooled companies,
prior to merger.... (1,259) (2,408)
Credits (charges) from
issuance of treasury
shares and other..... (6,322) (13,146) 6,687
-------- -------- --------
Balance, end of year.. $765,309 $642,634 $651,373
======== ======== ========
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT
Balance, beginning of
year................. $(22,550) $(23,640) $ (6,622)
Translation
adjustment........... 1,014 (1,347) (17,018)
Sale of investment in
unconsolidated
affiliate............ 2,437
-------- -------- --------
Balance, end of year.. $(21,536) $(22,550) $(23,640)
======== ======== ========
COST OF COMMON SHARES IN
TREASURY
Balance, beginning of
year................. 148 $ (4,067) 3,616 $(64,048) 5,646 $(89,099)
Purchases............. 2,783 (91,430) 1,774 (47,733) 1,512 (32,389)
Reissued for
Exercise of
options............ (544) 16,652 (908) 18,027 (810) 13,063
Sales to employee
stock plans........ (2,267) 74,067 (2,344) 47,799 (2,500) 40,564
Mergers,
acquisitions and
other.............. (2) 52 (1,990) 41,888 (232) 3,813
------- -------- ------- -------- ------ --------
Balance, end of year.. 118 $ (4,726) 148 $ (4,067) 3,616 $(64,048)
======= ======== ======= ======== ====== ========
</TABLE>
See notes to consolidated financial statements.
35
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FISCAL YEAR ENDED SEPTEMBER 30 (IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................... $ 202,732 $ 70,609 $ 100
Additions (deductions) to reconcile net income
to net cash provided by operating activities
Depreciation................................. 75,765 70,037 57,272
Amortization................................. 33,959 26,791 22,137
Provision for losses on accounts receivable.. 21,900 19,668 19,702
Provision (benefit) for deferred income
taxes....................................... 68,298 22,487 (55,042)
Change in deferred liabilities............... 32,513 2,816 15,232
Restructuring costs.......................... (60,364) (46,588) 169,939
Loss on sale of
Investment in unconsolidated affiliate....... 115,265
Alco Diversified Services.................... 9,841
Changes in operating assets and liabilities
Decrease (increase) in
Accounts receivable......................... (193,717) (74,369) (72,064)
Inventories................................. (111,933) 3,154 (52,877)
Prepaid expenses............................ (10,407) (17,873) (5,083)
Increase (decrease) in accounts payable,
deferred revenues, and accrued expenses..... 59,979 79,855 (52,563)
Miscellaneous................................ (3,808) 364 (13,267)
--------- --------- ---------
Net cash provided............................. 114,917 272,216 43,327
--------- --------- ---------
INVESTING ACTIVITIES
Proceeds from sale (net of cash retained) of
Investment in unconsolidated affiliate....... 8,226
Alco Diversified Services.................... 69,836
Cost of companies acquired, net of cash
acquired..................................... (299,840) (46,705) (439,447)
Proceeds from sale of property and equipment.. 25,926 24,833 21,769
Expenditures for property and equipment....... (99,234) (107,969) (83,789)
Payments received on long-term receivables.... 6,837 9,251 5,369
Purchases of miscellaneous assets............. (51,445) (7,973) (10,702)
Finance subsidiaries receivables--Additions... (696,217) (408,412) (278,503)
Finance subsidiaries receivables--
Collections.................................. 247,798 210,969 166,274
--------- --------- ---------
Net cash used................................. (866,175) (317,780) (549,193)
--------- --------- ---------
FINANCING ACTIVITIES
Proceeds from
Issuance of long-term debt................... 42,813 20,835 319,338
Issuance of Series BB conversion preferred
stock, net.................................. 290,152
Issuance of common stock, net................ 293,500
Issuance of Series AA convertible preferred
stock, net.................................. 196,335
Option exercises and sale of treasury
shares...................................... 91,848 69,914 62,284
Sale of finance subsidiaries lease
receivables................................. 66,677 125,000
Life insurance borrowings.................... 3,342 31,055
Issuance (repayment) of short-term borrowings,
net.......................................... 158,569 (68,278) 163,563
Proceeds (repayments) of accounts receivable
sold......................................... 10,741 14,985 (3,440)
Long-term debt repayments..................... (66,956) (369,238) (241,827)
Finance subsidiaries debt--Issuance........... 534,717 248,098 228,307
Finance subsidiaries debt--Repayments......... (182,014) (196,308) (124,201)
Dividends paid................................ (70,464) (59,392) (49,995)
Purchase of treasury shares................... (91,430) (47,733) (32,389)
--------- --------- ---------
Net cash provided............................. 787,995 62,438 517,975
--------- --------- ---------
NET INCREASE IN CASH.......................... 36,737 16,874 12,109
--------- --------- ---------
CASH AT BEGINNING OF YEAR..................... 53,369 36,495 24,386
--------- --------- ---------
CASH AT END OF YEAR........................... $ 90,106 $ 53,369 $ 36,495
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
36
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of Alco Standard
Corporation and its wholly owned subsidiaries (the Company). Significant
intercompany accounts and transactions have been eliminated in consolidation.
Revenue Recognition
Revenues are recorded at the time of shipment of products or performance of
services. Revenues from service 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 consist of
finished goods available for sale. 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 $92,590,000 higher at September
30, 1995 and $36,877,000 higher at September 30, 1994.
Goodwill
Substantially all goodwill (excess of cost of acquired companies over
equity) is amortized over 40 years by the straight-line method. The
recoverability of goodwill 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 evaluate whether impairment
exists on the basis of undiscounted expected future cash flows from operations
before interest for the remaining amortization period. If impairment exists,
the carrying amount of the goodwill is reduced by the estimated shortfall of
cash flows.
Depreciation
Properties and equipment are depreciated over their useful lives by the
straight-line method.
Earnings (Loss) Per Share
Earnings (loss) per share are based on 112,520,000 weighted average shares
in 1995, 107,458,000 shares in 1994 and 94,792,000 shares in 1993, and include
the dilutive effect of common stock equivalents, principally stock options.
Reclassifications
Certain prior-year amounts have been reclassified to conform with the
current-year presentation.
Foreign Currency Translation
All assets and liabilities of foreign subsidiaries are translated into US
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.
Accounting Changes
During fiscal 1994, the Company changed its methods of accounting for income
taxes and retiree healthcare benefits. The cumulative effect of adopting each
of these new accounting methods was immaterial.
37
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Pending Accounting Change
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement
121 in the first quarter of fiscal 1996 and, based on current circumstances,
does not believe the effect of adoption will be material.
Interest Rate Swap Agreements
The Company has entered into several interest rate swap agreements as a
means of managing its interest rate exposure. These agreements have the effect
of converting certain of the Company's variable rate obligations to fixed rate
obligations. Net amounts paid or received are reflected as adjustments to
interest expense.
Stock Split
All common shares and per share amounts have been adjusted to give
retroactive effect to a two-for-one stock split effected in the form of a
stock dividend distributed on November 9, 1995 to holders of record on October
27, 1995.
2. DISCONTINUED OPERATIONS AND DIVESTITURES
The Company has owned several manufacturing and industrial businesses, all
of which have been sold. There are currently environmental remediation claims
pending for manufacturing or landfill sites in the United States that relate
to these discontinued operations. As a result of several recent environmental
remediation claims, and increased estimated costs associated with existing
environmental remediation sites, primarily related to discontinued
manufacturing operations divested by the Company in 1991 and prior, the
Company took a fourth quarter charge in fiscal 1995 to increase its
liabilities for environmental remediation. The discontinued operations charge
was $23,630,000 ($16,541,000 net of tax) or $.14 per share. The adjustment
reflects management's best estimate, based on information currently available,
of costs to be incurred for existing and probable environmental claims of
discontinued operations.
In July 1993, the Company completed the sale of the Alco Diversified
Services (ADS) assets of approximately $102,000,000 to an investor group for
$84,000,000 in cash and notes. Accordingly, ADS results for fiscal 1993 are
reported in the accompanying Statements of Income as discontinued operations.
In fiscal 1993, ADS had revenues of $153,063,000, an operating loss of
$3,946,000, a loss on disposal of $9,841,000, and tax benefits of $6,272,000,
resulting in a net loss from discontinued operations of $7,515,000.
In September 1995, the Company divested Central Products Company for
$80,000,000 in cash and notes, and recorded a continuing operations pretax
gain of approximately $4,000,000 on the sale. Also included in the Company's
continuing operations and related to Central Products Company are fiscal 1995
revenues of $120,219,000 and net income from operations of $2,668,000.
During 1995, the Company agreed to pay $10,000,000 to settle a claim by a
former subsidiary, which had asserted that the Company was liable for certain
employee liabilities. This amount has been primarily charged against existing
reserves for discontinued operations. The Company paid $5,000,000 during 1995
with the remaining $5,000,000 to be paid over the next four years.
38
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITIONS
In June 1995, Erskine Limited, a U.K. subsidiary of the Company, purchased
all of the outstanding shares of Southern Business Group PLC (renamed A:Copy
(UK) PLC on October 1, 1995), for approximately $133,800,000. A:Copy (UK)
sells, leases, services and remanufactures copiers and other office equipment
in Southern England. Total assets acquired were $163,359,000, which includes
goodwill of $119,556,000. In addition, 111 other acquisitions were made in
fiscal 1995 for an aggregate purchase price of $266,773,000 in cash, notes and
stock. Total assets related to these 111 acquisitions were $368,836,000,
including goodwill of $244,668,000. The Company also issued 675,106 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.
$4,998,000 of additional cash was paid and capitalized in fiscal 1995 relating
to prior-years' acquisitions.
In fiscal 1994, the Company issued 1,397,350 common shares from treasury for
three acquisitions accounted for as poolings-of-interests and their results of
operations were included from the beginning of the fiscal year. Also during
fiscal 1994, 47 other acquisitions were made for an aggregate purchase price
of $62,009,000 in cash, notes and stock. Total assets related to these 47
acquisitions were $111,099,000, including goodwill of $55,165,000. An
additional $4,900,000 was paid and capitalized in fiscal 1994 relating to
prior-years' acquisitions.
In June 1993, the Company acquired over 90% of the outstanding shares of
Erskine House Group PLC (Erskine), 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 $278,975,000, including
goodwill of $180,408,000.
In July 1993, the Company acquired the paper distribution businesses of
Butler Paper Company for a purchase price of $140,000,000. Total assets
acquired were $277,843,000 and negative goodwill (excess of acquired equity
over cost) of approximately $37,157,000 was allocated to fixed assets.
During fiscal 1993, 21 other acquisitions were made for an aggregate
purchase price of $50,606,000 in cash and stock. Total assets acquired were
$68,878,000 including goodwill of $30,645,000. An additional $30,236,000 was
paid and capitalized in 1993 relating to prior-years' acquisitions.
All acquisitions, unless otherwise noted, are included in results of
operations from their dates of acquisition.
Had the purchase acquisitions been made at the beginning of the fiscal year
prior to their acquisition and the poolings been made on October 1, 1992, pro
forma results from continuing operations would have been:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ---------- ----------
FISCAL YEAR ENDED SEPTEMBER 30
---------------------------------
(IN THOUSANDS EXCEPT PER SHARE
DATA)
<S> <C> <C> <C>
Revenues..................................... $10,294,905 $8,753,729 $7,754,354
Income from continuing operations............ 256,452 122,244 25,636
Earnings per share........................... $ 1.98 $ .81 $ .13
</TABLE>
The pro forma results assume that $290,000,000 of the purchase price of 1995
acquisitions was funded by the proceeds from issuance of Series BB conversion
preferred stock, while $285,000,000 of the total purchase price of 1994 and
1993 acquisitions was funded by the proceeds from issuance of common stock in
December 1993 and $201,250,000 of the purchase price of 1993 acquisitions was
funded by the proceeds from issuance of the Series AA convertible preferred
stock.
39
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LOSS FROM UNCONSOLIDATED AFFILIATE
In October 1992, the Company purchased a 49.9% interest in IMM Office
Systems GmbH (IMMOS), a European distributor of office products, for
$122,500,000 in cash, which included goodwill of $107,478,000. In September
1994, the Company completed the sale of this investment for cash plus a
passive interest in any subsequent sale of IMMOS for five years. The Company
retains no ongoing liability in the joint venture and the parties exchanged
complete mutual releases for past actions. In addition, the Company was
relieved of the covenant not to compete in Europe contained in the joint
venture agreement, although the parties will not compete with each other for a
period expiring on December 31, 1995. As part of the transaction, the Company
acquired profitable operations in Denmark and France and retained limited
operations in Germany. The Company recognized a loss on the sale of its
investment in IMMOS in the quarter ended June 30, 1994, recording a pretax
loss of $115,300,000 ($95,100,000, net of tax) equating to a loss per share of
$.87 in the quarter ended June 30, 1994 and $.88 for the fiscal year ended
September 30, 1994. This loss represents the write-off of the Company's
investment in IMMOS, plus certain transactional costs less the cash proceeds
from the sale together with related tax benefits. In addition, the Company
recorded losses totaling $1,900,000, which represent the Company's share of
IMMOS operating losses for the first half of fiscal 1994.
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable consisted of:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable to banks at average interest rate:
1995--6.8%; 1994--5.5%............................. $279,496 $ 91,419
Other notes payable at average interest rate:
1995--7.2%; 1994--7.1%............................. 1,336 580
-------- --------
$280,832 $ 91,999
======== ========
Long-term debt consisted of:
<CAPTION>
SEPTEMBER 30,
-----------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Bond issue at interest rate of 8 7/8% due 2001....... $150,000 $150,000
Private placement debt at average interest rate:
1995--8.3%; 1994--8.2%; due 1998................... 50,000 70,000
Notes payable to insurance company at average
interest rate of 9.7% due
1997-2005.......................................... 60,000 60,000
Industrial revenue bonds at average interest rate:
1995--5.1%; 1994--8.4%; due 1996-2001.............. 10,328 10,537
Sundry notes, bonds and mortgages at average interest
rate of 7.5% due
1996-2005.......................................... 51,893 38,341
Present value of capital lease obligations (gross
amount:
1995--$45,894; 1994--$40,928)...................... 29,412 24,192
-------- --------
351,633 353,070
Less current maturities.............................. 26,319 12,299
-------- --------
Long-term debt....................................... $325,314 $340,771
======== ========
</TABLE>
40
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-term debt matures in fiscal years: 1996--$26,319,000; 1997--
$17,507,000; 1998--$59,432,000; 1999--$7,791,000; 2000--$5,139,000; 2001-
2005--$235,445,000.
On December 1, 1994, the Company entered into a credit agreement with 14
banks under which it may borrow up to $500,000,000. The agreement has two
parts: $150,000,000 is available for 364 days subject to annual renewal for
successive 364-day periods through December 1, 1999; the other $350,000,000
terminates on December 1, 1999. Facility fees of 8 basis points per annum on
the 364-day portion and 10 basis points per annum on the five-year portion are
charged for these commitments. The agreement provides that loans may be made
under either domestic or Eurocurrency notes at rates computed under a
selection of rate formulas including prime or Eurocurrency rates.
The Company may also borrow up to $100,000,000 or the Canadian dollar
equivalent under its amended April 1993 credit agreement with four banks. The
agreement has two parts: $50,000,000 is available for 364 days, subject to
annual renewal through April 19, 1996; the other $50,000,000 is available
through April 21, 1996. Facility fees of 8 basis points per annum on the 364-
day portion and 10 basis points per annum for the three-year portion are
charged for these commitments. 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.
At September 30, 1995, short-term borrowings supported by the combined lines
of credit totaled $252,496,000 leaving $347,504,000 unused and available.
The Company has entered into an agreement to borrow $55,000,000 in November
1995 with an interest rate of 7.15% maturing in November 2005. The proceeds
will be used to repay short-term notes payable.
The Company is in compliance with all covenants, including financial, for
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 $31,978,000 at September 30, 1995.
Interest paid, including finance subsidiaries, approximated $87,000,000,
$72,000,000 and $63,500,000 for fiscals 1995, 1994 and 1993, respectively.
6. SHAREHOLDERS' EQUITY
On July 25, 1995, the Company sold 3,877,200 depositary shares, each
representing 1/100th of a share of Series BB conversion preferred stock, for
$77.375 per depositary share totaling $299,998,350, and used the net proceeds
to reduce debt. Dividends are cumulative at $5.04 per year per depositary
share. This series of preferred stock has one vote per share (equivalent to
1/100 vote per depositary share) and has a liquidation preference of $77.375
per depositary share plus an amount equal to accrued and unpaid dividends.
Prior to October 1, 1998, each depositary share is convertible at the option
of the holder into 1.6393 shares of common stock of the Company. On October 1,
1998, unless previously converted at the option of the holder, each of the
outstanding depositary shares will automatically convert into a number of
shares of common stock of the Company equal to (a) 1.6393 shares of common
stock per depositary share if the current market price of the Company's common
stock is greater than or equal to $47.20 per share, (b) between 1.6393 and two
shares, equivalent to the current market price of the common stock if the
stock price is between $47.20 and $38.6875, and (c) two shares of common stock
per depositary share if the current market price of the Company's common stock
is at or below $38.6875 per share. The current market price to be used in the
conversion calculation will be the average closing price per share of common
stock of the Company on the twenty trading days immediately prior to, but not
including, October 1, 1998. At September 30, 1995, 7,754,400 shares of common
stock were reserved for conversion of the Series BB conversion preferred
stock.
41
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In December 1993, the Company issued 11,500,000 shares of common stock in a
public offering. The net proceeds from the offering of $293,500,000 were used
for repayment of debt. Income and earnings per share from continuing
operations for fiscal 1993 would have been $13,288,000 and $.03, respectively,
if the offering had occurred on October 1, 1992. Income from continuing
operations for fiscal 1994 would have been $71,896,000 and earnings per share
would have been unchanged if the offering had occurred on October 1, 1993.
On December 22, 1992, the Company sold 4,025,000 depositary shares, each
representing 1/100th of a share of Series AA convertible 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 $5,589,000 at September 30, 1995 has been credited
to Series AA convertible preferred stock. This series of preferred stock has
one vote per share (equivalent to 1/100 vote per depositary share) and is
convertible at a rate of 2.2402 shares of the Company's common stock per
depositary share at any time. The Series AA convertible preferred stock,
unless previously converted into common stock, is redeemable by issuance of
common stock at the Company's option at the rate of 2.2402 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, the Series AA convertible preferred stock has
preference equivalent to $50.00 per depositary share plus an amount equal to
accrued and unpaid dividends. At September 30, 1995, 9,016,806 shares of
common stock were reserved for conversion of the Series AA convertible
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 annual directors' fees 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, 1992...... 173,366 $ 9.78 to $14.34 4,511,194 $ 8.06 to $19.13
Granted................. 49,338 15.09 to 20.13 1,135,634 17.63 to 20.13
Exercised............... (34,448) 9.78 to 13.17 (775,832) 8.06 to 19.13
Cancelled............... (423,434) 11.44 to 20.13
------- ---------------- --------- ----------------
September 30, 1993...... 188,256 9.78 to 20.13 4,447,562 8.06 to 20.13
Granted................. 34,832 21.14 to 28.19 924,670 24.50 to 31.00
Exercised............... (42,630) 9.78 to 20.13 (865,482) 8.06 to 20.13
Cancelled............... (1,520) 15.09 (21,102) 8.06 to 28.81
------- ---------------- --------- ----------------
September 30, 1994...... 178,938 9.78 to 28.19 4,485,648 9.09 to 31.00
Granted................. 32,604 24.56 to 32.75 789,632 28.62 to 40.31
Exercised............... (39,852) 9.78 to 15.09 (814,398) 9.09 to 28.19
Cancelled............... (46,214) 14.31 to 32.81
------- ---------------- --------- ----------------
September 30, 1995...... 171,690 $ 9.78 to $32.75 4,414,668 $ 9.09 to $40.31
======= ================ ========= ================
</TABLE>
At September 30, 1995, options to purchase 2,291,248 shares were exercisable
(1995: employees--2,144,162, directors--147,086; 1994: employees--2,199,040,
directors--144,106) and 6,028,870 shares were
42
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
available for grant (1995: employees--5,131,744, directors--897,126; 1994:
employees--367,534, directors--929,730).
In fiscal 1995, with Board of Director and shareholder approvals, the
Company amended and restated its Long Term Incentive Compensation Plan (LTIP).
The plan is intended to motivate, recognize and reward key management
employees for long-term performance at the corporate or group level. Under the
plan, key management employees are granted stock awards to receive company
stock, which are earned upon achieving predetermined performance objectives
during three-year intervals. The value of these awards is charged to expense
over the related plan period. In fiscal 1995, the Company granted 602,530
stock awards under the plan, including 403,824 to replace stock options
granted under the original LTIP. At September 30, 1995, 128,818 of these
awards had been earned.
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 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 forgo 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.
7. TAXES ON INCOME--CONTINUING OPERATIONS
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No.
109 permitted the Company to recognize the benefit of certain deferred tax
assets that could not be recognized under the previous standard, SFAS No. 96,
which the Company adopted in fiscal 1988. The cumulative effect of adopting
SFAS No. 109 as of October 1, 1993 was to increase net income by $1,421,000 or
$.01 per share in fiscal 1994. As permitted under SFAS No. 109, prior-years'
financial statements have not been restated.
Provision for income taxes:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30,
----------------------------------------------------
1995 1994 1993
---------------- ---------------- ----------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
------- -------- ------- -------- ------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Federal.................. $38,904 $66,793 $46,349 $29,421 $57,200 $(48,149)
Foreign.................. 10,869 9,911 11,862 (7,855) 6,602 (948)
State.................... 15,470 (1,317) 5,505 921 3,706 (1,427)
------- ------- ------- ------- ------- --------
Taxes on income.......... $65,243 $75,387 $63,716 $22,487 $67,508 $(50,524)
======= ======= ======= ======= ======= ========
</TABLE>
43
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The components of deferred income tax assets and liabilities, including
finance subsidiaries, were as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation and amortization......................... $ 74,118 $ 62,487
Lease income recognition.............................. 119,783 82,837
-------- --------
Total deferred tax liabilities...................... 193,901 145,324
Deferred tax assets:
Nondeductible reserves................................ 143,257 145,067
Net operating loss carryforwards...................... 29,516 29,510
Other--net............................................ 1,511 12,092
-------- --------
Total deferred tax assets........................... 174,284 186,669
Valuation allowance................................... (31,048) (28,587)
-------- --------
Net deferred tax assets............................. 143,236 158,082
-------- --------
Net deferred tax liabilities (assets)................... $ 50,665 $(12,758)
======== ========
</TABLE>
Net operating loss carryforwards consist primarily of foreign carryforwards
of $50,858,000 principally expiring in years 1996 through 2000.
Deferred taxes resulting from temporary differences between financial and
tax accounting, which have not been restated for SFAS No. 109 as of September
30, 1993, were as follows (in thousands):
<TABLE>
<S> <C>
Depreciation...................................................... $ 4,741
Lease income recognition.......................................... 11,993
Nondeductible reserves............................................ (67,115)
Other............................................................. (143)
--------
Deferred taxes.................................................... $(50,524)
========
</TABLE>
Components of the effective income tax rate:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
SEPTEMBER 30
-------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Federal........................................ 35.0% 35.0% 34.8%
State.......................................... 2.6 2.3 6.1
Goodwill....................................... 1.8 3.5 16.1
Foreign........................................ .2 1.0 8.2
Effect of sale of IMMOS........................ 12.9
Other.......................................... (.5) .3 3.8
---- ---- ----
Effective income tax rate...................... 39.1% 55.0% 69.0%
==== ==== ====
</TABLE>
The effective tax rate for the fiscal year ended September 30, 1994,
excluding the effects of the loss on the sale of the investment in IMMOS, is
39.1%. The effective tax rate for the fiscal year ended September 30, 1993,
excluding the effects of the restructuring costs, is 39.6%.
Net income tax payments for all operations amounted to $30,436,000, net of
$30,000,000 refund, in 1995, $62,270,000 in 1994 and $77,487,000 in 1993.
44
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Undistributed earnings of the Company's foreign subsidiaries were
approximately $45,656,000 at September 30, 1995. Those earnings are considered
to be indefinitely reinvested and, therefore, no provision has been recorded
for U.S. federal and state income taxes.
8. PENSION 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 multiemployer and defined contribution pension plans ($4,915,000 in 1995,
$6,880,000 in 1994 and $5,134,000 in 1993) charged to continuing operations
amounted to $25,396,000 for 1995, $18,283,000 for 1994 and $12,684,000 for
1993.
The components of net periodic pension cost for the Company-sponsored
defined benefit pension plans are:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SEPTEMBER 30
----------------------------------
1995 1994 1993
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost........................... $ 21,506 $ 16,991 $ 11,123
Interest cost on projected benefit
obligation............................ 22,620 18,507 13,416
Actual return on plan assets........... (60,170) (11,020) (34,238)
Net amortization and deferral.......... 36,525 (13,075) 17,249
---------- ---------- ----------
Net pension cost....................... $ 20,481 $ 11,403 $ 7,550
========== ========== ==========
</TABLE>
Assumptions used in accounting for the Company-sponsored defined benefit
pension plans were:
<TABLE>
<CAPTION>
1995 1994 1993
----- ----- -----
<S> <C> <C> <C>
Weighted average discount rates......................... 7.50% 7.75% 7.25%
Rates of increase in compensation levels................ 6.00% 6.25% 5.75%
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>
SEPTEMBER 30
------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations
Vested................................................ $260,292 $237,874
======== ========
Accumulated........................................... $266,176 $241,069
======== ========
Projected............................................. $325,210 $277,500
Plan assets at fair value............................... 285,788 256,610
-------- --------
Plan assets less than projected benefits................ (39,422) (20,890)
Items not yet recognized
Net gain.............................................. (12,432) (3,873)
Prior service cost.................................... 19,409 11,657
Net asset existing at transition date................. (14,424) (16,397)
Adjustment required to recognize minimum liability...... (7,406) (8,385)
-------- --------
Net pension liability................................... $(54,275) $(37,888)
======== ========
</TABLE>
Substantially all of the plan assets at September 30, 1995 are invested in
listed stocks, bonds and government securities including common stock of the
Company of $67,800,000.
45
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company increased its net pension liability by $1,048,000 and $5,949,000
in fiscal 1995 and 1994, respectively, due to early retirement benefits
granted to employees in connection with the Unisource restructuring program
(note 15).
The majority of the Company's employees were eligible to participate in the
Company's Stock Participation Plan, under which they were permitted to invest
2% to 6% of regular compensation before taxes. The Company contributed an
amount equal to two-thirds of the employees' investments and all amounts were
invested in the Company's common shares. Effective October 2, 1995, the Stock
Participation Plan was replaced by a Retirement Savings Plan (RSP). The RSP
will allow employees to invest 1% to 16% of regular compensation before taxes
in six different investment funds. The Company will contribute an amount equal
to two-thirds of the employees' investments, up to 6% of regular compensation,
for a maximum company match of 4%. All Company contributions are invested in
the Company's common shares. Employees vest in a percentage of the Company's
contribution after two years of service, with full vesting at the completion
of five years of service. There is a similar plan for eligible management
employees. The cost of the stock participation plans charged to continuing
operations amounted to $26,885,000 in 1995, $23,484,000 in 1994 and
$16,174,000 in 1993.
9. SEGMENT REPORTING
A description of each of the Company's industry segments appears elsewhere
in this report. Dollar amounts for revenues, income before taxes, assets,
capital expenditures, and depreciation and amortization for each segment for
1995, 1994 and 1993 are reported on page 52.
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>
1995 1994 1993
-------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C>
REVENUES
Domestic.................. $8,805.6 $7,153.8 $5,649.8
Foreign................... 1,093.4 843.1 799.9
-------- -------- --------
Operating................. 9,899.0 7,996.9 6,449.7
Eliminations and
nonallocated............. (7.2) (.9) (5.1)
-------- -------- --------
Total................... $9,891.8 $7,996.0 $6,444.6
======== ======== ========
INCOME BEFORE TAXES
Domestic.................. $ 407.9 $ 332.6 $ 73.5
Foreign................... 69.0 29.1 27.3
-------- -------- --------
Operating................. 476.9 361.7 100.8
Unconsolidated affiliate.. (117.2) (2.5)
Nonallocated.............. (117.0)* (87.7)* (73.7)*
-------- -------- --------
Total................... $ 359.9 $ 156.8 $ 24.6
======== ======== ========
ASSETS
Domestic.................. $3,775.1 $2,787.7 $2,547.5
Foreign................... 792.3 572.5 536.4
-------- -------- --------
Operating................. 4,567.4 3,360.2 3,083.9
Unconsolidated affiliate.. 118.1
Nonallocated.............. 170.2 142.1 146.9
-------- -------- --------
Total................... $4,737.6 $3,502.3 $3,348.9
======== ======== ========
</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.
46
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. LEASES
Equipment acquired under capital leases is included in property and
equipment in the amount of $38,171,000 in 1995 and $37,160,000 in 1994 and the
related amounts of accumulated amortization are $15,657,000 in 1995 and
$15,888,000 in 1994. Related obligations are in long-term debt and related
amortization is included in depreciation.
At September 30, 1995, future minimum payments under noncancelable operating
leases with initial or remaining terms of more than one year were: 1996--
$88,430,000; 1997--$76,041,000; 1998--$61,576,000; 1999--$47,943,000; 2000--
$33,192,000; thereafter--$75,175,000.
Total rental expense was $103,891,000 in 1995, $89,998,000 in 1994 and
$68,293,000 in 1993.
11. CONTINGENCIES
There are contingent liabilities for taxes, guarantees, lawsuits,
environmental remediation claims relating to continuing and discontinued
operations (see note 2) 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.
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>
SEPTEMBER 30,
---------------------
1995 1994
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Future minimum lease payments receivable.............. $1,084,967 $ 645,083
Less: Unearned income................................. (165,492) (109,416)
---------- ---------
Lease receivables..................................... 919,475 535,667
Accounts receivable and other assets.................. 63,847 26,736
---------- ---------
Finance subsidiaries assets........................... $ 983,322 $ 562,403
========== =========
Debt at average interest rate:
1995--6.8%; 1994--5.8% due 1996--2000................. $ 817,585 $ 464,882
Other liabilities..................................... 55,198 33,828
---------- ---------
Finance subsidiaries liabilities...................... $ 872,783 $ 498,710
========== =========
</TABLE>
Net income of the finance subsidiaries included in the Company's
consolidated results of operations was $14,472,000 in 1995, $13,347,000 in
1994, and $8,180,000 in 1993.
At September 30, 1995, future minimum payments to be received under direct
financing leases were: 1996--$396,931,000; 1997--$334,613,000; 1998--
$206,212,000; 1999--$103,880,000; 2000--$42,248,000; thereafter--$1,083,000.
47
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
On June 30, 1995, Alco Capital Resource, Inc. (Alco Capital), a wholly owned
finance subsidiary of the Company, increased the amount available to be
offered under its medium term notes program by $1,000,000,000 or the
equivalent thereof in foreign currency. The medium term note program effective
July 1, 1994 of $500,000,000 was fully subscribed as of July 1995. The program
allows Alco Capital to offer to the public from time to time medium term notes
having an aggregate initial offering price not exceeding the total program
amount. These notes will be offered at varying maturities of nine months or
more from their dates of issue and may be subject to redemption at the option
of Alco Capital or repayment at the option of the holder, in whole or in part,
prior to the maturity date in conjunction with meeting specified provisions.
Interest rates are determined based on market conditions at the time of
issuance. As of September 30, 1995, $602,000,000 of medium term notes are
outstanding with a weighted average interest rate of 7.0%.
Alco Capital has followed a policy of matching the maturities of borrowed
funds to the underlying direct financing leases in order to minimize the
impact of interest rate changes on its operations. Alco Capital has therefore
entered into interest rate swap agreements to eliminate the impact of interest
rate changes on its variable rate notes payable. The interest rate swap
agreements effectively convert the variable rate notes into fixed rate
obligations. During fiscal 1995, there were two variable rate notes
outstanding and two related interest rate swap agreements on a
principal/notional amount of $57,000,000. The weighted average interest rate
on these variable rate notes and related interest rate swap agreements was
6.58% and 4.76%, respectively, during 1995.
In September 1994, Alco Capital entered into an agreement to sell, under an
asset securitization program, an undivided ownership interest in $125,000,000
of eligible direct financing lease receivables. The agreement, which expires
in September 1996, contains limited recourse provisions that require Alco
Capital to assign an additional undivided interest in leases to cover any
potential losses to the purchaser due to uncollectible leases. As collections
reduce previously sold interests, new leases can be sold up to $125,000,000.
The weighted average interest rate on the agreement, which is partially fixed
by three interest rate swap agreements totaling a principal/notional amount of
$90,000,000 is 7.0% at September 30, 1995. In fiscal 1995, Alco Capital sold
$67,000,000 in leases, replacing leases liquidated during the year.
13. SALE OF ACCOUNTS RECEIVABLE
The Company entered into an agreement to sell, with limited recourse, up to
CN$95,000,000 of certain eligible Canadian accounts receivable through
December 1, 1995. The agreement, which is expected to be extended, provides
limited recourse to the Company in the event that any of the previously sold
receivables become uncollectible. As collections reduce previously sold
interests, new receivables will be sold up to CN$95,000,000. The amount of
receivables sold under the agreement was CN$95,000,000 (US$71,000,000) and
CN$80,000,000 (US$60,000,000) at September 30, 1995 and 1994, respectively.
14. 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 discussed below.
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.
48
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Interest Rate Swap Agreements
In addition to the interest rate swap agreements related to finance
subsidiaries financial instruments discussed in note 12, the Company has
several other interest rate swap agreements. These agreements have a total
principal/notional amount of $47,000,000 and have fixed rates from 6.99% to
7.855%. The Company is required to make payments to the counterparties at the
fixed rate stated in the agreements and in return the Company receives
payments at variable rates (LIBOR).
The Company is exposed to credit loss in the event of nonperformance by the
counterparties to the interest rate swap agreements. However, the Company does
not anticipate nonperformance by the counterparties.
The following methods and assumptions were used by the Company in estimating
fair value disclosures for financial instruments.
Cash, Notes Payable and Long-Term Receivables
The carrying amounts reported in the consolidated balance sheets approximate
fair value.
Long-Term Debt
The fair value of long-term debt instruments is estimated using a discounted
cash flow analysis. For more information on these instruments, refer to note
5.
Off-Balance-Sheet Instruments
Fair values for the Company's off-balance-sheet instruments (interest rate
swaps) are based on the termination of the agreements.
The carrying amounts and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30
------------------------------------
1995 1994
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Long-term debt:
Bond issue........................... $150,000 $165,311 $150,000 $156,833
Private placement debt............... 50,000 52,043 70,000 71,837
Notes payable to insurance company... 60,000 65,286 60,000 62,614
Industrial revenue bonds............. 10,328 9,765 10,537 11,442
Sundry notes, bonds and mortgages.... 51,893 53,160 38,341 36,786
Finance subsidiaries debt.............. 817,585 824,989 464,882 455,674
Interest rate swaps.................... (3,671) 1,426
</TABLE>
15. RESTRUCTURING COSTS
On September 29, 1993, the Company adopted a plan to restructure paper
distribution business including the following: installation of a customer-
focused information system, redesigning 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 $175,000,000 ($112,875,000 net of taxes or $1.19 per share) in the
fourth quarter of fiscal 1993. The charge provided for facility consolidation
($60,700,000), severance costs ($48,000,000) and related organizational and
system redesign ($22,000,000).
49
<PAGE>
ALCO STANDARD CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At September 30, 1995, the remaining restructuring reserve is $39,302,000,
which management believes is adequate to complete the restructuring plan by
mid-fiscal 1997. As of September 30, 1995, 84 facility consolidations had been
substantially completed. The estimated cost to complete the facility
consolidations is $17,000,000 of which a significant portion relates to costs
to dispose and maintain facilities that have been or will be vacated.
Severance costs have been incurred during 1995 and 1994 in accordance with the
plan and $10,000,000 is the estimated balance for severance costs. The related
organizational and system redesign is estimated to have a remaining cost of
$6,000,000. The Company estimates the remaining cash expenditures for the
restructuring plan will be $31,000,000 and will be spent in fiscal 1996 and
early fiscal 1997.
16. COMMITMENTS
Effective January 1, 1994, the Company entered into an outsourcing agreement
that will provide the information technology system to be implemented as part
of the Unisource restructuring plan (note 15). This agreement calls for the
payment of $300,000,000 over a ten-year period. At September 30, 1995, the
remaining commitment under the agreement is $217,000,000.
50
<PAGE>
CORPORATE FINANCIAL SUMMARY
<TABLE>
<CAPTION>
EIGHT-
YEAR
COMPOUND
GROWTH 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE DATA, SHAREHOLDERS OF RECORD, EMPLOYEES)
<S> <C> <C> <C> <C> <C>
CONTINUING
OPERATIONS
Revenues........... 15.3% $9,891.8 $7,996.0 $6,444.6 $4,925.1
Gross profit....... 18.6 2,524.9 2,083.3 1,621.1 1,267.1
% of revenues..... 25.5 26.1 25.2 25.7
Selling and
administrative.... 18.2 2,109.1 1,765.5 1,378.8 1,069.6
% of gross
profit........... 83.5 84.7 85.1 84.4
Operating income... 22.3 476.9 361.7 100.8 225.7
% of revenues..... 4.8 4.5 1.6 4.6
Income before
taxes............. 19.8 359.9 156.8 24.6 172.5
% of revenues..... 3.6 2.0 .4 3.5
Effective income
tax rate (%)...... 39.1 55.0 69.0 39.6
Income............. 20.4 219.3 70.6 7.6 104.2
% of revenues..... 2.2 .9 .1 2.1
Earnings (loss) per
share
Primary........... 1.81 .55 (.02) 1.11
Fully diluted..... (e) (e) (e) (e)
Capital
expenditures...... 13.5 99.2 108.0 78.8 54.8
Depreciation and
amortization...... 14.8 109.7 96.8 76.1 59.3
------------------------------------------------------
DISCONTINUED
OPERATIONS
Income (loss)...... $ (16.6) $ (7.5) $ (8.4)
Earnings (loss) per
share
Primary........... (.14) (.08) (.09)
Fully diluted..... (e) (e) (e)
------------------------------------------------------
TOTAL OPERATIONS
Net income......... 12.3% $ 202.7 $ 70.6 $ .1 $ 95.8
Earnings (loss) per
share
Primary........... 1.67 .55 (.10) 1.02
Fully diluted..... (e) (e) (e) (e)
------------------------------------------------------
SHARE ACTIVITY
Dividends per
share............. 6.2% $ .52 $ .50 $ .48 $ .46
Per share book
value............. 8.9 12.28 10.72 8.76 9.36
Return on
shareholders'
equity (a)........ 16.0 14.8(b) 11.5(b) 11.4
Average common and
common equivalent
shares............ 112.5 107.5 94.8 93.8
Shareholders of
record............ 15,099 14,348 13,999 13,726
------------------------------------------------------
SUPPLEMENTARY
INFORMATION
Days sales
outstanding....... 36.8 37.8 38.9 37.8
Inventory turns
(FIFO basis)...... 6.1 6.3 6.3 5.9
Current ratio...... 1.6 1.6 1.5 1.7
Pretax return on
capital employed.. 17.2 17.1(b) 14.7(b) 15.3
Pretax return on
capital employed
with finance
subsidiaries on
equity method..... 21.3 18.4(b) 15.7(b) 16.2
Working capital.... 6.6% $ 770.5 $ 653.5 $ 556.6 $ 496.0
Total assets....... 16.6 4,737.6 3,502.3 3,348.9 2,444.8
Total debt......... 25.9 1,450.1 910.0 1,207.4 782.2
% of
capitalization... 43.7 40.0 53.6 47.6
Total debt
excluding finance
subsidiaries...... 15.1 632.5 445.1 794.3 481.7
% of
capitalization... 25.3 24.6 43.2 35.8
Serial preferred
stock............. .3 1.6
Employees.......... 36,500 30,600 28,500 23,500
<CAPTION>
1991 1990 1989 1988 1987
-------- -------- -------- -------- --------
(IN MILLIONS EXCEPT PER SHARE DATA, SHAREHOLDERS OF RECORD, EMPLOYEES)
<S> <C> <C> <C> <C> <C>
CONTINUING
OPERATIONS
Revenues........... $4,516.0 $4,293.4 $3,783.6 $3,379.4 $3,173.7
Gross profit....... 1,110.0 1,022.4 841.9 690.3 646.8
% of revenues..... 24.6 23.8 22.3 20.4 20.4
Selling and
administrative.... 946.8 864.4 711.1 584.7 552.1
% of gross
profit........... 85.3 84.5 84.5 84.7 85.4
Operating income... 195.3 190.0 153.0 128.4 95.2
% of revenues..... 4.3 4.4 4.0 3.8 3.0
Income before
taxes............. 125.8 111.5(d) 97.8 90.2 84.7(c)
% of revenues..... 2.8 2.6 2.6 2.7 2.7
Effective income
tax rate (%)...... 39.1 42.3 17.1 18.2 38.3
Income............. 76.7 64.3(d) 81.1 72.5 49.7(c)
% of revenues..... 1.7 1.5 2.1 2.1 1.6
Earnings (loss) per
share
Primary........... .85 .72(d) .90 .74 .55(c)
Fully diluted..... (e) (e) (e) (e) .52(c)
Capital
expenditures...... 47.4 57.9 57.1 38.3 35.9
Depreciation and
amortization...... 58.2 49.5 43.8 37.3 36.4
------------------------------------------------------------
DISCONTINUED
OPERATIONS
Income (loss)...... $ 40.9 $ 29.2 $ 85.5 $ 37.0 $ 30.5
Earnings (loss) per
share
Primary........... .45 .33 .94 .38 .34
Fully diluted..... (e) (e) (e) (e) .31
------------------------------------------------------------
TOTAL OPERATIONS
Net income......... $ 117.6 $ 93.5(d) $ 166.6 $ 109.5 $ 80.2(c)
Earnings (loss) per
share
Primary........... 1.30 1.05(d) 1.84 1.12 .89(c)
Fully diluted..... (e) (e) (e) (e) .83(c)
------------------------------------------------------------
SHARE ACTIVITY
Dividends per
share............. $ .44 $ .42 $ .38 $ .34 $ .32
Per share book
value............. 9.20 8.47 7.48 7.04 6.21
Return on
shareholders'
equity (a)........ 15.0 13.5 16.9(f) 16.9 15.8
Average common and
common equivalent
shares............ 90.1 89.1 90.4 97.5 90.3
Shareholders of
record............ 14,096 14,152 13,410 14,103 12,875
------------------------------------------------------------
SUPPLEMENTARY
INFORMATION
Days sales
outstanding....... 38.6 39.7 39.3 38.5 38.9
Inventory turns
(FIFO basis)...... 5.7 5.7 5.7 5.6 5.3
Current ratio...... 1.9 1.7 1.6 1.9 2.1
Pretax return on
capital employed.. 20.8 20.1 20.8(f) 19.9 21.3
Pretax return on
capital employed
with finance
subsidiaries on
equity method..... 22.5 21.6 21.7(f) 20.3 21.3
Working capital.... $ 516.0 $ 404.3 $ 342.8 $ 412.3 $ 462.5
Total assets....... 2,020.6 1,916.5 1,623.9 1,512.4 1,389.3
Total debt......... 524.9 450.6 378.0 253.6 229.4
% of
capitalization... 38.9 37.4 36.9 26.6 26.3
Total debt
excluding finance
subsidiaries...... 304.2 291.0 283.5 201.4 205.8
% of
capitalization... 27.0 27.8 30.5 22.4 24.2
Serial preferred
stock............. 2.9 4.9 7.4 9.9 11.4
Employees.......... 18,800 20,900 19,800 17,300 17,300
</TABLE>
- -------
(a) From continuing operations.
(b) Excludes the effect of the sale of IMMOS (note 4) in fiscal 1994 and
restructuring costs (note 15) in fiscal 1993.
(c) Includes the sale of an automobile leasing subsidiary that resulted in a
pretax gain of $17,637,000.
(d) Includes unusual pretax charges relating to the Hillman Companies of
$10,323,000.
(e) Dilution is immaterial after 1987; therefore no disclosure.
(f) Excludes gain on sale of Alco Health Services Corporation of pretax--
$96,800,000; net income--$61,900,000.
Note: All share and per share amounts are post-stock split.
Note: Unless otherwise noted, ratios and operating results include the effect
of: fiscal 1994--loss on sale of investment in IMMOS (note 4), pretax income
($115,265,000), net income ($95,086,000), earnings per share ($.88); fiscal
1993--restructuring costs (note 15), operating income ($175,000,000), net
income ($112,875,000), earnings per share ($1.19).
51
<PAGE>
SEGMENT DATA
<TABLE>
<CAPTION>
INCOME DEPRECIATION
BEFORE CAPITAL AND
REVENUES TAXES ASSETS EXPENDITURES AMORTIZATION
-------- ------- -------- ------------ ------------
(CONTINUING OPERATIONS, IN MILLIONS)
<S> <C> <C> <C> <C> <C>
EIGHT-YEAR COMPOUND
GROWTH
1987-1995
Alco Office Products.... 32.7% 39.5% 40.3% 14.0% 22.0%
Unisource............... 15.0 14.2 18.1 22.9 15.3
======== ======= ======== ====== ======
1995
Alco Office Products.... $2,911.7 $ 251.8 $2,570.4 $ 48.4 $ 74.4
Unisource
United States......... 6,183.3 184.1 1,666.7 48.5 27.1
Canada................ 804.0 41.0 330.3 1.5 6.2
-------- ------- -------- ------ ------
Total Unisource......... 6,987.3 225.1 1,997.0 50.0 33.3
-------- ------- -------- ------ ------
Operating............... 9,899.0 476.9 4,567.4 98.4 107.7
Eliminations and
nonallocated........... (7.2) (117.0)* 170.2 .8 2.0
-------- ------- -------- ------ ------
$9,891.8 $ 359.9 $4,737.6 $ 99.2 $109.7
======== ======= ======== ====== ======
1994
Alco Office Products.... $2,240.4 $ 199.4 $1,672.2 $ 72.5 $ 62.7
Unisource
United States......... 5,107.6 148.8 1,391.5 30.5 26.1
Canada................ 648.9 13.5 296.5 3.4 6.4
-------- ------- -------- ------ ------
Total Unisource......... 5,756.5 162.3 1,688.0 33.9 32.5
-------- ------- -------- ------ ------
Operating............... 7,996.9 361.7 3,360.2 106.4 95.2
Unconsolidated
affiliate.............. (117.2)
Eliminations and
nonallocated........... (.9) (87.7)* 142.1 1.6 1.6
-------- ------- -------- ------ ------
$7,996.0 $ 156.8 $3,502.3 $108.0 $ 96.8
======== ======= ======== ====== ======
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
nonallocated........... (5.1) (73.7)* 146.9 1.2 1.5
-------- ------- -------- ------ ------
$6,444.6 $ 24.6 $3,348.9 $ 78.8 $ 76.1
======== ======= ======== ====== ======
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
nonallocated........... (2.0) (59.9)* 69.2 .8 1.7
-------- ------- -------- ------ ------
$4,925.1 $ 172.5 $2,321.2 $ 54.8 $ 59.3
======== ======= ======== ====== ======
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
INCOME DEPRECIATION
BEFORE CAPITAL AND
REVENUES TAXES ASSETS EXPENDITURES AMORTIZATION
-------- ------ -------- ------------ ------------
(CONTINUING OPERATIONS, IN MILLIONS)
<S> <C> <C> <C> <C> <C>
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
nonallocated........... (8.0) (69.5)* 177.8 2.5 3.1
-------- ------ -------- ----- -----
$4,516.0 $125.8 $1,864.6 $47.4 $58.2
======== ====== ======== ===== =====
1990
Alco Office Products.... $ 951.7 $ 58.9 $ 680.5 $32.3 $33.2
Unisource
United States......... 3,316.3 129.4 843.9 24.6 14.9
Canada................ 22.2 1.7 8.5 .1 .2
-------- ------ -------- ----- -----
Total Unisource......... 3,338.5 131.1 852.4 24.7 15.1
-------- ------ -------- ----- -----
Operating............... 4,290.2 190.0 1,532.9 57.0 48.3
Investment gain......... 5.6
Unusual charges (AOP)... (10.3)
Eliminations and
nonallocated........... 3.2 (73.8)* 88.8 .9 1.2
-------- ------ -------- ----- -----
$4,293.4 $111.5 $1,621.7 $57.9 $49.5
======== ====== ======== ===== =====
1989
Alco Office Products.... $ 729.5 $ 41.3 $ 540.4 $26.5 $26.7
Unisource--United
States................. 3,047.3 111.7 692.7 27.5 14.5
-------- ------ -------- ----- -----
Operating............... 3,776.8 153.0 1,233.1 54.0 41.2
Eliminations and
nonallocated........... 6.8 (55.2)* 108.3 3.1 2.6
-------- ------ -------- ----- -----
$3,783.6 $ 97.8 $1,341.4 $57.1 $43.8
======== ====== ======== ===== =====
1988
Alco Office Products.... $ 484.8 $ 28.9 $ 328.7 $19.6 $19.4
Unisource--United
States................. 2,755.5 99.5 670.9 15.9 13.9
-------- ------ -------- ----- -----
Operating............... 3,240.3 128.4 999.6 35.5 33.3
Gains, net of losses,
from divestitures...... 7.9
Eliminations and
nonallocated........... 139.1 (46.1)* 140.0 2.8 4.0
-------- ------ -------- ----- -----
$3,379.4 $ 90.2 $1,139.6 $38.3 $37.3
======== ====== ======== ===== =====
1987
Alco Office Products.... $ 303.7 $ 17.6 $ 171.0 $17.0 $15.2
Unisource--United
States................. 2,281.7 77.6 528.8 9.6 10.7
-------- ------ -------- ----- -----
Operating............... 2,585.4 95.2 699.8 26.6 25.9
Gains, net of losses,
from divestitures...... 17.6
Eliminations and
nonallocated........... 588.3 (28.1)* 348.5 9.3 10.5
-------- ------ -------- ----- -----
$3,173.7 $ 84.7 $1,048.3 $35.9 $36.4
======== ====== ======== ===== =====
</TABLE>
- --------
* Includes interest costs and net corporate expenses.
53
<PAGE>
QUARTERLY DATA
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
------------- ------------- ------------- ------------- -------------
(UNAUDITED, IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
1995
Revenues................ $ 2,181.6 $ 2,445.8 $ 2,595.9 $ 2,668.5 $ 9,891.8
Gross profit............ 565.8 619.6 658.0 681.5 2,524.9
Income before taxes..... 74.5 81.9 97.1 106.4 359.9
Income (loss)
Continuing
operations........... 45.5 49.1 58.9 65.8 219.3
Discontinued
operations........... (16.6)(a) (16.6)(a)
------------- ------------- ------------- ------------- -------------
Net income.............. $ 45.5 $ 49.1 $ 58.9 $ 49.2 $ 202.7
============= ============= ============= ============= =============
Earnings (loss) per
share
Continuing
operations........... $ .38 $ .41 $ .50 $ .52 $ 1.81
Discontinued
operations........... (.14)(a) (.14)(a)
------------- ------------- ------------- ------------- -------------
$ .38 $ .41 $ .50 $ .38 $ 1.67
============= ============= ============= ============= =============
Dividends per share..... $ .13 $ .13 $ .13 $ .13 $ .52
Common stock price
High/Low.............. 31 7/8-26 1/2 36 7/8-30 7/8 40 1/8-34 3/8 43 5/8-38 1/4 43 5/8-26 1/2
--------------------------------------------------------------------------
1994
Revenues................ $ 1,921.8 $ 1,969.4 $ 2,001.3 $ 2,103.5 $ 7,996.0
Gross profit............ 485.4 511.7 535.4 550.8 2,083.3
Income (loss) before
taxes.................. 53.4 63.0 (38.9)(b) 79.3 156.8(b)
Net income (loss)....... 31.9 38.0 (48.3)(b) 49.0 70.6(b)
============= ============= ============= ============= =============
Earnings (loss) per
share.................. .30 .32 (.48)(b) .42 .55(b)
============= ============= ============= ============= =============
Dividends per share..... $ .125 $ .125 $ .125 $ .125 $ .50
Common stock price
High/Low.............. 27 3/8-21 3/4 29 3/8-25 3/4 30 1/8-24 3/4 32 3/4-28 1/2 32 3/4-21 3/4
</TABLE>
- --------
(a) The Company recorded a pretax charge of $23,630,000 ($16,541,000 net of
taxes or $.14 per share) for environmental liabilities of discontinued
operations.
(b) Includes a pretax charge of $115,265,000 ($95,086,000 net of taxes or $.87
per share for the third quarter and $.88 for the fiscal year) for the sale
of the investment in IMMOS.
Note: All share and per share amounts are post-stock split.
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. Alco currently expects to continue
its policy of paying quarterly 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 and may be
limited by covenants in certain loan agreements.
54
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
SEC Filing Fee................................................... $157,974
Listing Fees..................................................... 8,000
Printing Expenses ............................................... 35,000
Accounting Fees.................................................. 20,000
Legal Fees....................................................... 2,000
Miscellaneous expenses........................................... 5,000
--------
Total............................................................ $227,974
========
</TABLE>
All of the above amounts, except for the SEC filing fee, have been
estimated. All such amounts will be paid by Alco.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Ohio General Corporation Law provides that a corporation may indemnify
persons who incur certain liabilities or expenses by reason of such persons
being or having been directors, officers, or employees of the registrant or
serving or having served in such capacities or similar capacities at the
registrant's request for other corporations or entities. Pursuant to the Ohio
law, the registrant has adopted, as a part of its Code of Regulations,
provisions whereby the registrant shall indemnify such persons against such
liabilities and expenses resulting from suits or other proceedings brought by
third persons and against expenses resulting from suits or other proceedings
brought in the right of the registrant, except that no indemnification against
expenses is to be made in respect of claims brought in the right of the
registrant where such person is finally adjudged to be liable for negligence
or misconduct in the performance of his duty to the registrant unless specific
court approval for such indemnification is obtained.
The registrant has purchased liability insurance policies covering its
directors and officers to provide additional protection where the registrant
cannot legally indemnify a director or officer and where a claim arises under
the Employee Retirement Income Security Act of 1974 against a director or
officer based upon an alleged breach of fiduciary or other wrongful act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
From time to time during the three-year period prior to the filing of this
registration statement, Alco has made unregistered sales of its common stock
to the sellers of acquired businesses pursuant to an exemption from
registration contained in Section 4(2) of the Securities Act of 1933. Such
shares were subsequently registered for resale on Form S-3 as follows:
<TABLE>
<CAPTION>
REGISTRATION
STATEMENT NO. FILING DATE NUMBER OF SHARES OF COMMON STOCK
------------- ----------- --------------------------------
<S> <C> <C>
33-49863 July 30, 1993 84,400
33-53711 May 19, 1994 992,180
33-54779 July 28, 1994 731,742
33-55947 October 7, 1994 244,818
33-56455 November 14, 1994 51,310
33-56457 November 14, 1994 93,548
</TABLE>
Based upon the market value of the Alco common shares described above on the
date of the relevant business acquisition, the total consideration received by
Alco for the above businesses was $61,518,000.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES*
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
3.1 Amended and Restated Articles of Incorporation of Alco Standard
Corporation ("Alco"), filed as Exhibit 3.1 to Alco's 1995 Form 10-K,
is incorporated herein by reference.
3.2 Code of Regulations of Alco, 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,
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, 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. Amendment No. 1 to Revolving Credit and
Acceptance Agreement, filed as Exhibit 4.2 to Alco's 1994 Form 10-K,
is incorporated herein by reference.
4.3 Credit Agreement, dated December 1, 1994, among Alco and various
institutional lenders, filed as Exhibit 4.8 to Alco's Registration
Statement No. 33-56437, is incorporated herein by reference.
Amendment No. 1 dated February 1, 1995, filed as Exhibit 4.3 to
Alco's 1995 Form 10-K, is incorporated herein by reference.
4.4 Receivables Purchase Agreement and Guarantee between PCA Paper
Acquisition Inc., Stars Trust, Alco and Bank of Montreal, filed as
Exhibit 4.4 to Alco's 1992 10-K, is incorporated herein by
reference. Amendment dated September 30, 1994 to Receivables
Purchase Agreement, filed as Exhibit 4.4 to Alco's 1994 Form 10-K,
is incorporated herein by reference.
4.5 Credit Agreement dated as of October 13, 1995 among Alco Office
Systems Canada, Inc., Deutsche Bank Canada, Chemical Bank of Canada
and Royal Bank of Canada, filed as Exhibit 4.5 to Alco's 1995 Form
10-K, is incorporated herein by reference.
4.6 Participation Agreement dated as of November 8, 1994 among Unisource
Worldwide, Inc. and AOP, Inc. as Lessees, Alco, as Guarantor, PPI
SPV, L.P., as Lessor, Pitcairn SPV Inc., as General Partner of
Lessor and Trust Company Bank, as Lender and Agent, filed as Exhibit
4.6 to Alco's 1995 Form 10-K, is incorporated herein by reference.
4.7 Rights Agreement dated as of February 10, 1988 between Alco 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.
4.8 Assumption Agreement and Amended and Restated Note Agreement dated
as of May 13, 1994 between Alco and the Prudential Insurance Company
of America, filed as Exhibit 4.5 to Alco's 1994 10-K, is
incorporated herein by reference. Amendment No. 1 dated September
30, 1995, filed as Exhibit 4.8 to Alco's 1995 Form 10-K, is
incorporated herein by reference.
4.9 Note Purchase Agreement between Alco and various purchasers dated
July 15, 1995 for $55 million in 7.15% Notes due November 15, 2005,
filed as Exhibit 4.9 to Alco's 1995 Form 10-K, is incorporated
herein by reference.
4.10 Pursuant to Regulation S-K item 601(b)(iii), Alco agrees to furnish
to the Commission, upon request, a copy of other instruments
defining the rights of holders of long-term debt of Alco and its
subsidiaries.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
5 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the
legality of the securities being registered.
7 Opinion of Ballard Spahr Andrews & Ingersoll with respect to the
liquidation preference of preferred stock.
10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco 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 Alco Standard Corporation Amended and Restated Long Term Incentive
Compensation Plan, filed as Exhibit 10.2 to Alco's 1995 Form 10-K,
is incorporated herein by reference.
10.3 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit 10.3
to Alco's 1994 Form 10-K, is incorporated herein by reference.
10.4 Alco Standard Corporation Partners' Stock Purchase Plan, filed as
Exhibit 10.4 to Alco's 1994 Form 10-K, is incorporated herein by
reference.
10.5 Alco Standard Corporation 1981 Stock Option Plan, filed as Exhibit
10.5 to Alco's 1992 Form 10-K, is incorporated herein by reference.
10.6 Alco Standard Corporation Amended and Restated 1986 Stock Option
Plan, filed as Exhibit 10.6 to Alco's 1995 Form 10-K, is
incorporated herein by reference.
10.7 Alco Standard Corporation 1989 Directors' Stock Option Plan, filed
as Exhibit 10.3 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.8 Alco Standard Corporation 1993 Directors' Stock Option Plan, filed
as Exhibit 10.7 to Alco's 1993 Form 10-K, is incorporated herein by
reference.
10.9 Alco Standard Corporation 1995 Stock Option Plan, filed as Exhibit
94 to Alco's Registration Statement No. 33-56469 on Form S-8, is
incorporated herein by reference.
10.10 Alco Standard Corporation 1980 Deferred Compensation Plan, filed as
Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.11 Alco Standard Corporation 1985 Deferred Compensation Plan, filed as
Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.12 Alco Standard Corporation 1991 Deferred Compensation Plan, filed as
Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated herein by
reference.
10.13 Alco Standard Corporation Retirement Plan for Non-Employee
Directors, filed as Exhibit 10.10 to Alco's 1992 Form 10-K, is
incorporated herein by reference.
10.14 Alco Standard Corporation Amended and Restated 1994 Deferred
Compensation Plan, filed as Exhibit 10.14 to Alco's 1995 Form 10-K,
is incorporated herein by reference.
10.15 Indenture, dated as of April 1, 1986 between Alco and the Chase
Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to Alco's
Registration Statement No. 30-4829, is incorporated herein by
reference.
10.16 Support Agreement dated as of June 1, 1994 between Alco and Alco
Capital Resource, Inc. (Alco's leasing subsidiary), filed as Exhibit
10.4 to Alco Capital Resource's Amended Registration Statement in
Form 10-12G/A dated May 27, 1994, is incorporated herein by
reference.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------- ----------------------
<C> <S>
10.17 Maintenance Agreement, dated as of August 15, 1991 between Alco and
Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed as
Exhibit 10.2 to Alco Capital Resource's Registration Statement on
Form 10 dated May 4, 1994, is incorporated herein by reference.
10.18 Operating Agreement, dated as of August 15, 1991 between Alco and
Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed as
Exhibit 10.3 to Alco Capital Resource's Registration Statement on
Form 10 dated May 4, 1994, is incorporated herein by reference.
10.19 Agreement effective January 1, 1994 between Unisource Worldwide,
Inc. and Integrated Systems Solution Corporation, a subsidiary of
IBM, portions of which contain confidential material, filed as
Exhibit 10.20 to Alco's 1994 Form 10-K/A filed on March 17, 1995, is
incorporated herein by reference.
10.20 Receivables Transfer Agreement dated as of September 23, 1994 Among
Alco Capital Resource, Inc., Twin Towers, Inc. and Deutsche Bank AG,
New York Branch, portions of which contain confidential material,
filed as Exhibit 10.21 to Alco's 1994 Form 10-K/A filed on March 17,
1995, is incorporated herein by reference.
10.21 Distribution Agreement dated as of July 1, 1995 between Alco Capital
Resource, Inc. and various distribution agents, filed as Exhibit
10.21 to Alco's 1995 Form 10-K, is incorporated herein by reference.
10.22 Indenture dated as of July 1, 1994 between Alco Capital Resource,
Inc. and Nations Bank, N.A., as Trustee, filed as Exhibit 4 to Alco
Capital Resource's Registration Statement No. 33-53779, is
incorporated herein by reference.
10.23 Indenture dated as of July 1, 1995 between Alco Capital Resource,
Inc. and Chemical Bank, N.A., as Trustee, filed as Exhibit 10.23 to
Alco's 1995 Form 10-K, is incorporated herein by reference.
11 Statement re: Computation of earnings per share, filed as Exhibit 11
to Alco's 1995 Form 10-K, is incorporated herein by reference.
21 Subsidiaries of Alco, filed as Exhibit 21 to Alco's 1995 Form 10-K,
is incorporated herein by reference.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of Attorney.
27 Financial Data Schedule.
</TABLE>
- --------
II-4
<PAGE>
(b) Financial Statement Schedules
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Shareholders
Alco Standard Corporation
We have audited the consolidated financial statements of Alco Standard
Corporation as of September 30, 1995 and 1994, and for each of the three years
in the period ended September 30, 1995, and have issued our report thereon
dated October 17, 1995 (except for the stock split described in note 1, as to
which the date is November 9, 1995) included elsewhere in this Registration
Statement. Our audits also included the financial statement schedule included
in Item 16(b) of this Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express
an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
October 17, 1995,
except for the stock split described
in note 1, as to which the date is
November 9, 1995
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------ ------ ------ ------
ADDITIONS
-----------------------
CHARGED TO
BALANCE AT CHARGED TO OTHER
BEGINNING OF COSTS AND ACCOUNTS-- DEDUCTIONS-- BALANCE AT END
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE OF PERIOD
----------- ------------ ----------- ----------- ------------ --------------
YEAR ENDED SEPTEMBER 30, 1995
- -----------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $29,428,000 $21,900,000 $17,249,000(1) $19,949,000(2) $48,628,000
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1994
- -----------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $27,528,000 $19,668,000 $ 836,000(1) $18,604,000(2) $29,428,000
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1993
- -----------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts............... $23,947,000 $19,702,000 $ 4,768,000(1) $20,889,000(2) $27,528,000
</TABLE>
- --------
(1) Represents beginning balances of acquired companies.
(2) Accounts written off during year, net of recoveries.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer, or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN VALLEY FORGE, PENNSYLVANIA, ON THE
4TH DAY OF DECEMBER, 1995.
Alco Standard Corporation
/s/ Michael J. Dillon
Date: December 4, 1995 By: _________________________________
(MICHAEL J. DILLON) VICE PRESIDENT
AND CONTROLLER (PRINCIPAL
ACCOUNTING OFFICER)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*John E. Stuart Chairman, President, December 4, 1995
- ------------------------------------- Chief Executive
(JOHN E. STUART) Officer and
Director (Principal
Executive Officer)
*Kurt E. Dinkelacker Executive Vice December 4, 1995
- ------------------------------------- President and
(KURT E. DINKELACKER) Acting Chief
Financial Officer
(Principal
Financial Officer)
/s/ Michael J. Dillon Vice President and December 4, 1995
- ------------------------------------- Controller
(MICHAEL J. DILLON) (Principal
Accounting Officer)
*Ray B. Mundt Director December 4, 1995
- -------------------------------------
(RAY B. MUNDT)
*J. Mahlon Buck, Jr. Director December 4, 1995
- -------------------------------------
(J. MAHLON BUCK, JR.)
*Paul J. Darling, II Director December 4, 1995
- -------------------------------------
(PAUL J. DARLING, II)
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
*William F. Drake, Jr. Director December 4, 1995
- -------------------------------------
(WILLIAM F. DRAKE, JR.)
*James J. Forese Director December 4, 1995
- -------------------------------------
(JAMES J. FORESE)
*Frederick S. Hammer Director December 4, 1995
- -------------------------------------
(FREDERICK S. HAMMER)
*Barbara Barnes Hauptfuhrer Director December 4, 1995
- -------------------------------------
(BARBARA BARNES HAUPTFUHRER)
*Dana G. Mead Director December 4, 1995
- -------------------------------------
(DANA G. MEAD)
*Paul C. O'Neill Director December 4, 1995
- -------------------------------------
(PAUL C. O'NEILL)
*Rogelio G. Sada Director December 4, 1995
- -------------------------------------
(ROGELIO G. SADA)
*James W. Stratton Director December 4, 1995
- -------------------------------------
(JAMES W. STRATTON)
</TABLE>
* 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 registration statement on behalf of the persons whose
signatures are printed above, in the capacities set forth opposite their
respective names.
<TABLE>
<S> <C>
/s/ Hugh G. Moulton December 4, 1995
- -------------------------------------
(HUGH G. MOULTON)
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
------- ------- ----
<C> <S> <C>
3.1 Amended and Restated Articles of Incorporation of Alco Standard
Corporation ("Alco"), filed as Exhibit 3.1 to Alco's 1995 Form
10-K, is incorporated herein by reference.
3.2 Code of Regulations of Alco, 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, 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, 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. Amendment No. 1 to
Revolving Credit and Acceptance Agreement, filed as Exhibit 4.2
to Alco's 1994 Form 10-K, is incorporated herein by reference.
4.3 Credit Agreement, dated December 1, 1994, among Alco and
various institutional lenders, filed as Exhibit 4.8 to Alco's
Registration Statement No. 33-56437, is incorporated herein by
reference. Amendment No. 1 dated February 1, 1995, filed as
Exhibit 4.3 to Alco's 1995 Form 10-K, is incorporated herein by
reference.
4.4 Receivables Purchase Agreement and Guarantee between PCA Paper
Acquisition Inc., Stars Trust, Alco and Bank of Montreal, filed
as Exhibit 4.4 to Alco's 1992 10-K, is incorporated herein by
reference. Amendment dated September 30, 1994 to Receivables
Purchase Agreement, filed as Exhibit 4.4 to Alco's 1994 Form
10-K, is incorporated herein by reference.
4.5 Credit Agreement dated as of October 13, 1995 among Alco Office
Systems Canada, Inc., Deutsche Bank Canada, Chemical Bank of
Canada and Royal Bank of Canada, filed as Exhibit 4.5 to Alco's
1995 Form 10-K, is incorporated herein by reference.
4.6 Participation Agreement dated as of November 8, 1994 among
Unisource Worldwide, Inc. and AOP, Inc. as Lessees, Alco, as
Guarantor, PPI SPV, L.P., as Lessor, Pitcairn SPV Inc., as
General Partner of Lessor and Trust Company Bank, as Lender and
Agent, filed as Exhibit 4.6 to Alco's 1995 Form 10-K, is
incorporated herein by reference.
4.7 Rights Agreement dated as of February 10, 1988 between Alco 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.
4.8 Assumption Agreement and Amended and Restated Note Agreement
dated as of May 13, 1994 between Alco and the Prudential
Insurance Company of America, filed as Exhibit 4.5 to Alco's
1994 10-K, is incorporated herein by reference. Amendment No. 1
dated September 30, 1995, filed as Exhibit 4.8 to Alco's 1995
Form 10-K, is incorporated herein by reference.
4.9 Note Purchase Agreement between Alco and various purchasers
dated July 15, 1995 for $55 million in 7.15% Notes due November
15, 2005, filed as Exhibit 4.9 to Alco's 1995 Form 10-K, is
incorporated herein by reference.
4.10 Pursuant to Regulation S-K item 601(b)(iii), Alco agrees to
furnish to the Commission, upon request, a copy of other
instruments defining the rights of holders of long-term debt of
Alco and its subsidiaries.
5 Opinion of Ballard Spahr Andrews & Ingersoll with respect to
the legality of the securities being registered.
7 Opinion of Ballard Spahr Andrews & Ingersoll with respect to
the liquidation preference of preferred stock.
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
------- ------- ----
<C> <S> <C>
10.1 Note Purchase Agreement, dated as of June 15, 1986 between Alco
and certain institutional investors, filed as Exhibit 4.2 to
Alco's Current Report on Form 8-K, dated July 1, 1988, is
incorporated herein by reference.
10.2 Alco Standard Corporation Amended and Restated Long Term
Incentive Compensation Plan, filed as Exhibit 10.2 to Alco's
1995 Form 10-K, is incorporated herein by reference.
10.3 Alco Standard Corporation Annual Bonus Plan, filed as Exhibit
10.3 to Alco's 1994 Form 10-K, is incorporated herein by
reference.
10.4 Alco Standard Corporation Partners' Stock Purchase Plan, filed
as Exhibit 10.4 to Alco's 1994 Form 10-K, is incorporated
herein by reference.
10.5 Alco Standard Corporation 1981 Stock Option Plan, filed as
Exhibit 10.5 to Alco's 1992 Form 10-K, is incorporated herein
by reference.
10.6 Alco Standard Corporation Amended and Restated 1986 Stock
Option Plan, filed as Exhibit 10.6 to Alco's 1995 Form 10-K, is
incorporated herein by reference.
10.7 Alco Standard Corporation 1989 Directors' Stock Option Plan,
filed as Exhibit 10.3 to Alco's 1992 Form 10-K, is incorporated
herein by reference.
10.8 Alco Standard Corporation 1993 Directors' Stock Option Plan,
filed as Exhibit 10.7 to Alco's 1993 Form 10-K, is incorporated
herein by reference.
10.9 Alco Standard Corporation 1995 Stock Option Plan, filed as
Exhibit 94 to Alco's Registration Statement No. 33-56469 on
Form S-8, is incorporated herein by reference.
10.10 Alco Standard Corporation 1980 Deferred Compensation Plan,
filed as Exhibit 10.7 to Alco's 1992 Form 10-K, is incorporated
herein by reference.
10.11 Alco Standard Corporation 1985 Deferred Compensation Plan,
filed as Exhibit 10.8 to Alco's 1992 Form 10-K, is incorporated
herein by reference.
10.12 Alco Standard Corporation 1991 Deferred Compensation Plan,
filed as Exhibit 10.9 to Alco's 1992 Form 10-K, is incorporated
herein by reference.
10.13 Alco Standard Corporation Retirement Plan for Non-Employee
Directors, filed as Exhibit 10.10 to Alco's 1992 Form 10-K, is
incorporated herein by reference.
10.14 Alco Standard Corporation Amended and Restated 1994 Deferred
Compensation Plan, filed as Exhibit 10.14 to Alco's 1995 Form
10-K, is incorporated herein by reference.
10.15 Indenture, dated as of April 1, 1986 between Alco and the Chase
Manhattan Bank, N.A., as Trustee, filed as Exhibit 4.1 to
Alco's Registration Statement No. 30-4829, is incorporated
herein by reference.
10.16 Support Agreement dated as of June 1, 1994 between Alco and
Alco Capital Resource, Inc. (Alco's leasing subsidiary), filed
as Exhibit 10.4 to Alco Capital Resource's Amended Registration
Statement in Form 10-12G/A dated May 27, 1994, is incorporated
herein by reference.
10.17 Maintenance Agreement, dated as of August 15, 1991 between Alco
and Alco Capital Resource, Inc. (Alco's leasing subsidiary),
filed as Exhibit 10.2 to Alco Capital Resource's Registration
Statement on Form 10 dated May 4, 1994, is incorporated herein
by reference.
10.18 Operating Agreement, dated as of August 15, 1991 between Alco
and Alco Capital Resource, Inc. (Alco's leasing subsidiary),
filed as Exhibit 10.3 to Alco Capital Resource's Registration
Statement on Form 10 dated May 4, 1994, is incorporated herein
by reference.
10.19 Agreement effective January 1, 1994 between Unisource
Worldwide, Inc. and Integrated Systems Solution Corporation, a
subsidiary of IBM, portions of which contain confidential
material, filed as Exhibit 10.20 to Alco's 1994 Form 10-K/A
filed on March 17, 1995, is incorporated herein by reference.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. EXHIBIT NO.
------- ------- ----
<C> <S> <C>
10.20 Receivables Transfer Agreement dated as of September 23, 1994
Among Alco Capital Resource, Inc., Twin Towers, Inc. and
Deutsche Bank AG, New York Branch, portions of which contain
confidential material, filed as Exhibit 10.21 to Alco's 1994
Form 10-K/A filed on March 17, 1995, is incorporated herein by
reference.
10.21 Distribution Agreement dated as of July 1, 1995 between Alco
Capital Resource, Inc. and various distribution agents, filed
as Exhibit 10.21 to Alco's 1995 10-K, is incorporated herein by
reference.
10.22 Indenture dated as of July 1, 1994 between Alco Capital
Resource, Inc. and Nations Bank, N.A., as Trustee, filed as
Exhibit 4 to Alco Capital Resource's Registration Statement No.
33-53779, is incorporated herein by reference.
10.23 Indenture dated as of July 1, 1995 between Alco Capital
Resource, Inc. and Chemical Bank, N.A., as Trustee, filed as
Exhibit 10.23 to Alco's 1995 10-K, is incorporated herein by
reference.
11 Statement re: Computation of earnings per share, filed as
Exhibit 11 to Alco's 1995 10-K, is incorporated herein by
reference.
21 Subsidiaries of Alco, filed as Exhibit 21 to Alco's 1995 10-K,
is incorporated herein by reference.
23 Auditors' Consent.
24 Powers of Attorney; certified resolution re: Powers of
Attorney.
27 Financial Data Schedule.
</TABLE>
3
<PAGE>
EXHIBIT 5
December 4, 1995
Alco Standard Corporation
P.O. Box 834
Valley Forge, PA 19482
Ladies and Gentlemen:
We have acted as counsel to Alco Standard Corporation ("Alco") in connection
with the filing of a Registration Statement on Form S-1 (the "Registration
Statement") to register under the Securities Act of 1933, as amended, 10,000,000
shares of its Common Stock (the "Shares") for offering from time to time in
connection with the acquisition of businesses and properties by Alco and its
subsidiaries. The Shares may be presently authorized but unissued shares or
shares held as treasury shares at the time of their delivery. In this connection
we have made such investigation and reviewed such documents as we deem necessary
in the circumstances to render the following opinion.
Based upon such investigation and review, it is our opinion that the Shares
have been duly authorized for issue, and when (i) authorized for issuance by the
Board of Directors of Alco in transactions of the type and for the consideration
described in the Registration Statement and (ii) issued or delivered upon
receipt of such consideration, such Shares will be legally issued, fully paid
and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to this opinion and to our firm in
the prospectus included therein.
Very truly yours,
/s/ Ballard Spahr Andrews &
Ingersoll
<PAGE>
EXHIBIT 7
December 4, 1995
Alco Standard Corporation
P.O. Box 834
Valley Forge, Pa 19482
Ladies and Gentlemen:
In connection with the filing by Alco Standard Corporation ("Alco") of a
registration statement on Form S-1 with respect to the registration of
10,000,000 shares of its Common Stock (no par value) (the "Registration
Statement") to be issued from time to time by Alco in connection with
acquisitions of businesses and properties by Alco and its subsidiaries, we have
been requested to furnish our opinion as to whether any preference upon
liquidation provided in shares of Serial Preferred Stock (no par value) of Alco
places any restrictions upon Alco's surplus if such preference exceeds the
stated or carrying value of such shares.
In this connection we have reviewed Alco's Articles of Incorporation and the
relevant provisions of the Ohio General Corporation Law, particularly Sections
1701.30, 1701.32 and 1701.33, Revised Code of Ohio. Under the Articles of
Incorporation of Alco the Board of Directors is empowered to fix the
liquidation preference of each series of Serial Preferred Stock in the event of
any liquidation, dissolution or winding up, which preference may exceed the
stated or carrying value of such shares on the books of Alco.
In our opinion, there are no restrictions upon the payment of dividends or
other distributions out of Alco's surplus solely by reason of the excess of the
liquidation preference over the stated or carrying value of shares of Serial
Preferred Stock and there are no remedies available to security holders before
or after the payment of any dividend or distribution by Alco solely because
such dividend may reduce its surplus to an amount less than the amount of such
excess.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Ballard Spahr Andrews &
Ingersoll
<PAGE>
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated October 17, 1995 (except for the stock split described
in note 1, as to which the date is November 9, 1995), in the Registration
Statement (Form S-1) and related Prospectus of Alco Standard Corporation for the
registration of 10,000,000 shares of its common stock.
/s/ Ernst & Young LLP
Philadelphia, Pennsylvania
November 30, 1995
<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, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
SIGNED: /s/PAUL J. DARLING, II
---------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is Acting Chief Financial Officer of
Alco Standard Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
SIGNED: /s/KURT E. DINKELACKER
---------------------------
<PAGE>
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, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as her attorneys-in-fact, each with the power of
substitution, to execute, on her behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
SIGNED: /s/DANA G. MEAD
----------------------------------
<PAGE>
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, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
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 Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
SIGNED: /s/JAMES W. STRATTON
--------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
The undersigned certifies that he is Chairman, President and Chief
Executive Officer of Alco Standard Corporation ("Alco").
The undersigned hereby appoints each of Hugh G. Moulton, J. Kenneth Croney
and Michael J. Dillon as his attorneys-in-fact, each with the power of
substitution, to execute, on his behalf the foregoing registration statement on
Form S-1, for filing with the Securities and Exchange Commission ("SEC"), and to
execute any and all amendments to said registration statement, and to do all
such other acts and execute all such other documents which said attorney may
deem necessary or desirable.
Dated this 4th day of December, 1995.
SIGNED: /s/JOHN E. STUART
--------------------------
<PAGE>
Exhibit 24.1
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 10, 1995, and that such resolutions
are, as of the date hereof, in full force and effect:
RESOLVED, that each of the officers and directors of the
corporation is hereby authorized to appoint Hugh G. Moulton and J. Kenneth
Croney and Michael J. Dillon 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 debt securities 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, I have hereunto set my hand this 4th day of December,
1995.
/s/ J. KENNETH CRONEY
-----------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
consolidated financial statements of Alco Standard Corporation and subsidiaries
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 90,106,000
<SECURITIES> 0
<RECEIVABLES> 1,224,327,000
<ALLOWANCES> 48,628,000
<INVENTORY> 747,895,000
<CURRENT-ASSETS> 2,160,567,000
<PP&E> 745,235,000
<DEPRECIATION> 375,285,000
<TOTAL-ASSETS> 4,737,575,000<F2>
<CURRENT-LIABILITIES> 1,390,077,000
<BONDS> 325,314,000
<COMMON> 637,414,000
0
492,076,000<F1>
<OTHER-SE> 739,047,000
<TOTAL-LIABILITY-AND-EQUITY> 4,737,575,000<F3>
<SALES> 9,794,186,000
<TOTAL-REVENUES> 9,891,826,000
<CGS> 7,326,721,000
<TOTAL-COSTS> 7,366,937,000<F4>
<OTHER-EXPENSES> 2,109,148,000<F5>
<LOSS-PROVISION> 21,900,000
<INTEREST-EXPENSE> 55,838,000
<INCOME-PRETAX> 359,903,000
<INCOME-TAX> 140,630,000
<INCOME-CONTINUING> 219,273,000
<DISCONTINUED> (16,541,000)<F6>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 202,732,000
<EPS-PRIMARY> 1.67<F7>
<EPS-DILUTED> 1.63<F8>
<FN>
<F1>Redeemable solely at the Company's option.
<F2>Includes Finance Subsidiaries assets (primarily lease receivables) of
$983,322,000
<F3>Includes Finance Subsidiaries liabilities (primarily debt) of $872,783,000
<F4>Includes Finance Subsidiaries interest of $40,216,000
<F5>Represents selling, general, and administrative expenses.
<F6>Represents loss on discontinued operations net of income tax benefit of
$7,089,000.
<F7>Primary earnings per share from continuing operations is $1.81, from
discontinued operations ($0.14).
<F8>Fully diluted earnings per share from continuing operations is $1.77, from
discontinued operations ($0.14).
</FN>
</TABLE>
