-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VJBZfqiAc6xZRwHnfyqgctAtX/kbHXCG4NSidtTik2xeDJfRv7qKc/eEVCd3eP61 zbtvLT6qKDBQCFKN16qFsg== 0000950109-97-001261.txt : 19970222 0000950109-97-001261.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950109-97-001261 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNISOURCE WORLDWIDE INC CENTRAL INDEX KEY: 0001027282 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PAPER AND PAPER PRODUCTS [5110] IRS NUMBER: 135369500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-14482 FILM NUMBER: 97533382 BUSINESS ADDRESS: STREET 1: 825 DUPORTAIL ROAD CITY: WAYNE STATE: PA ZIP: 19087 BUSINESS PHONE: 6102968000 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 Form 10-Q (Mark One)* [X] Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended December 31, 1996 or [_] Transition ----------------- report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to _____ _____ Commission file number 1-14482 ------------ UNISOURCE WORLDWIDE, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-5369500 - ------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 825 Duportail Road, Wayne, Pennsylvania 19087 Box 958, Valley Forge, Pennsylvania 19482 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (610) 296-4470 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) NONE - -------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X** No ** With respect to (2) above, registrant has been ----- ----- subject to the Exchange Act filing requirements since November 26, 1996. * Applicable only to issuers involved in bankruptcy proceedings during the preceding five years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No --- --- * Applicable only to corporate issuers: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of January 31, 1997. Common Stock, par value $0.001 66,944,719 shares INDEX UNISOURCE WORLDWIDE, INC. PART I. FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Financial Statements (Unaudited) Condensed Consolidated Balance Sheets--December 31, 1996 3-4 and September 30, 1996 Condensed Consolidated Statements of Income--Three months 5 ended December 31, 1996 and December 31, 1995 Condensed Consolidated Statements of Cash Flows--Three 6 months ended December 31, 1996 and December 31, 1995 Notes to Condensed Consolidated Financial Statements-- 7-8 December 31, 1996 Item 2. Management's Discussion and Analysis of Results 9-11 of Operations and Financial Condition and Liquidity PART II. OTHER INFORMATION - --------------------------- Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 - ---------- - 2 - PART I. FINANCIAL INFORMATION Item 1: Financial Statements (unaudited) - ---------------------------------------- UNISOURCE WORLDWIDE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
December 31, September 30, ASSETS 1996 1996 - ------ ----------- ------------- Current Assets Cash $ 46,931 $ 14,596 Accounts receivable, net 736,896 790,818 Inventories 497,201 470,217 Prepaid expenses and deferred taxes 52,894 54,853 ---------- ------------ Total current assets 1,333,922 1,330,484 ---------- ------------ Long-Term Receivables 8,961 21,890 Property and Equipment, at cost 403,468 396,681 Less accumulated depreciation 181,716 172,513 ---------- ------------ 221,752 224,168 ---------- ------------ Goodwill 502,742 509,850 Deferred costs and other assets 124,531 105,322 ---------- ------------ $ 2,191,908 $ 2,191,714 ========== ============
See notes to condensed consolidated financial statements. -3- UNISOURCE WORLDWIDE, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (dollars in thousands)
December 31, September 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1996 - ------------------------------------ ------------- ------------- Current Liabilities Current portion of long-term debt $ 655 $ 840 Notes payable 28,029 38,367 Trade accounts payable 381,654 438,899 Accrued salaries, wages and commissions 22,451 27,011 Restructuring costs 11,871 15,575 Other accrued expenses 91,604 59,000 ------------- ------------- Total current liabilities 536,264 579,692 ------------- ------------- Long-Term Debt 598,981 21,097 Notes and Advances Payable to IKON 221 553,700 Other Liabilities Deferred taxes 45,671 54,462 Restructuring costs 12,000 13,896 Other long-term liabilities 46,510 33,366 ------------- ------------- 104,181 101,724 ------------- ------------- Stockholders' Equity Common stock, 12/31 - par value $.001, authorized 250,000,000 shares issued and outstanding - 66,902,083 shares; 9/30 - par value $.01, authorized 10,000,000 shares, issued and outstanding - 100,000 shares 67 1 Additional paid in capital 779,703 778,444 Retained earnings 201,609 181,458 Foreign currency translation adjustments (29,118) (24,402) ------------- ------------- 952,261 935,501 ------------- ------------- $ 2,191,908 $ 2,191,714 ============= ============
See notes to condensed consolidated financial statements. -4- UNISOURCE WORLDWIDE, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except earnings per share)
Three Months Ended December 31, ------------------------------------------------------ 1996 1995 ------------------ ------------------- Revenues $ 1,728,533 $ 1,716,165 Costs and Expenses Cost of goods sold 1,428,429 1,446,701 Selling and administrative 255,000 219,277 ------------------ ------------------- 1,683,429 1,665,978 ------------------ ------------------- Income from operations 45,104 50,187 Interest expense 10,361 6,905 ------------------ ------------------- Income before taxes 34,743 43,282 Provision for income taxes 14,592 17,053 ------------------ ------------------- Net income $ 20,151 $ 26,229 ================== =================== Earnings Per Share $0.30 Pro Forma Earnings Per Share $0.35 Shares Outstanding 67,576 67,576
See notes to condensed consolidated financial statements. -5- UNISOURCE WORLDWIDE, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Three Months Ended December 31, ------------------------------------ 1996 1995 ------------------------------------ Operating Activities Net income $ 20,151 $ 26,229 Additions (deductions) to reconcile net income to net cash provided (used) by operating activities: Depreciation 7,340 6,245 Amortization 4,401 2,529 Provisions for losses on accounts receivable 4,025 3,328 Payments for restructuring costs (5,853) (13,644) Changes in operating assets and liabilities, net of effects from acquisitions and divestitures: Decrease in accounts receivable 43,569 88,604 Increase in inventories (26,754) (70,741) Decrease (increase) in prepaid expenses 1,960 (3,184) Decrease in accounts payable and accrued expenses (24,915) (104,733) Miscellaneous 252 1,603 ------------- ------------ Net cash provided (used) by operating activities 24,176 (63,764) ------------- ------------ Investing activities Proceeds from the sale of property and equipment 3,630 919 Collection of notes receivable 19,250 - Cost of companies acquired, net of cash acquired (3,255) (60,763) Expenditures for property and equipment (7,678) (10,554) Deferred cost expenditures (17,670) (20,440) ------------- ------------ Net cash used in investing activities (5,723) (90,838) ------------- ------------ Financing activities Debt repayments (21,639) (8,079) Proceeds from revolving credit facility borrowings, net 589,000 - (Repayments to) proceeds from IKON (553,479) 146,387 ------------- ------------ Net cash provided by financing activities 13,882 138,308 ------------- ------------ Net increase (decrease) in cash 32,335 (16,294) Cash at beginning of period 14,596 23,657 ------------- ------------ Cash at end of period $ 46,931 $ 7,363 ============= ============
See notes to condensed consolidated financial statements. -6- UNISOURCE WORLDWIDE, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS December 31, 1996 Note 1: Spin-off and Basis of Presentation ---------------------------------- Effective December 31, 1996, one share of Unisource Worldwide, Inc. (the "Company" or "Unisource") common stock was distributed to holders of Alco Standard Corporation ("Alco") common stock for every two shares of Alco common stock owned at the established record date ( the "Spin-off"). Effective January 23, 1997, Alco changed its name to IKON Office Solutions, Inc. ("IKON"). At the time of the Spin-off, the Company became a separate publicly owned company. The unaudited condensed consolidated financial statements included herein have been prepared on the historical cost basis and present the Company's financial position, results of operations and cash flows as derived from IKON's historical financial statements, except that the method of allocation of general corporate expenses has been changed to more appropriately reflect the Company's actual use of corporate services. IKON's interest expense on consolidated borrowings for the three months ended December 31, 1995 was allocated to Unisource based on the relationship of its net assets to consolidated IKON net assets. The Company's interest expense for the three months ended December 31, 1996 was based on its actual borrowings, including notes and advances payable to IKON and borrowings under the Company's credit facility described in Note 2. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results of operations for the three months ended December 31, 1996 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 1997. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Company included in its Form 10 Registration Statement that became effective November 26, 1996. Note 2: Debt ---- On November 22, 1996, the Company entered into a $1,000,000,000 five-year unsecured revolving credit facility. The credit facility includes multicurrency options for up to $100,000,000 in Pounds Sterling, Deutsche Marks and French Francs and a $100,000,000 subfacility for Canadian dollar loans. Borrowings under the revolver bear interest at either the Alternate Base Rate (as defined) or LIBOR - 7 - plus a spread equal to 18.5 basis points during the initial six months of the credit facility. After the initial six month period, the LIBOR spread will range from 14.5 to 30 basis points, depending on certain financial ratios or credit ratings. The credit facility provides for certain fees, including a facility fee and utilization fee. The facility fee ranges from 8 to 15 basis points per annum on the full amount of the credit facility, determined in a manner consistent with the LIBOR spread described above. A utilization fee of 5 basis points per annum accrues on the aggregate amount of all loans outstanding during the initial six months of the credit facility and 5 basis points per annum thereafter each day the aggregate amount of all loans under the credit facility exceeds two-thirds of the aggregate commitment. The credit facility includes financial covenants requiring a ratio of funded debt to capitalization of less than 55% and a minimum net worth of $745,000,000 plus 50% of consolidated net income (without deduction for losses) after the date of the credit facility. The amount outstanding under this facility at December 31, 1996 was $589,000,000. The majority of these proceeds were used to repay intercompany debt to IKON in conjunction with the Spin-off. Note 3: Earnings Per Share and Pro Forma Earnings per Share --------------------------------------------------- Earnings per share for the three months ended December 31, 1996 was calculated based on the number of Company shares issued and outstanding as of December 31, 1996 plus the dilutive effect of stock options. Pro Forma earnings per share for the three months ended December 31, 1995 includes additional pro forma interest expense of $3,741,000 ($2,259,000 net of tax), which assumes that the Spin-off occurred on October 1, 1995. The same share base that was used for the December 31, 1996 earnings per share calculation was used for the pro forma calculation. - 8 - Item 2: Management's Discussion and Analysis of Results -------------------------------------------------------- of Operations and Financial Condition and Liquidity --------------------------------------------------- Results of Operations --------------------- Revenues and income before taxes for the first quarter of fiscal 1997 compared to the first quarter of fiscal 1996 were as follows:
Three Months Ended December 31 -------------------------------- 1996 1995 % Change ---- ---- -------- (In Millions) Revenues $1,729 $1,716 0.7% ====== ====== Gross profit $300.1 $269.5 11.4% Selling and administrative expense 255.0 219.3 16.3% ------ ------ Operating income 45.1 50.2 (10.1%) Interest expense 10.4 6.9 50.1% ------ ------ Income before taxes $ 34.7 $ 43.3 (19.7%) ====== ======
Revenues increased $13 million, or 0.7% to $1.73 billion in the first quarter of fiscal 1997, compared to the first quarter of the prior year. This change is due to increases associated with current and prior year acquisitions of $152 million, which were offset by revenue declines of $139 million in base operations. The decline in base operations is principally due to an estimated decrease in average paper prices of 17% compared to the same period last year. The price deflation was partially offset by volume gains in the base operations. Gross margins increased by $30.6 million, or 11.4% to $300.1 million. This change is due to increases associated with current and prior year acquisitions of $39.8 million, offset by declines of $9.2 million in base operations. Gross margin percentages rose to 17.4% from 15.7% of revenues due to lower costs from suppliers for many products, higher margin percentages generated by acquired companies, and a higher proportion of Unisource warehouse delivered (versus mill direct) sales. Selling and administrative expense increased by $35.7 million, or 16.3%, including $30 million related to current and prior year acquisitions. Operating income decreased $5.1 million, or 10.1%. Current and prior year acquisitions contributed an incremental $9.8 million of operating income. Operating income from base operations declined $14.9 million, primarily due to paper price declines which were - 9 - partially offset by improvement in gross margin percentages and volume increases. Operating margins were 2.6% of revenues for the first quarter of 1997 compared to 2.9% in the prior year. Interest expense increased by $3.5 million to $10.4 million during the first three months of fiscal 1997 compared to the prior year. The increase was attributable to higher average outstanding borrowings due to the recapitalization of the Company as of September 30, 1996 in anticipation of the Spin-off from IKON. The $6.9 million of interest expense for the first three months of fiscal 1996 represents an allocation of IKON's outside interest expense based on the relationship of the Company's net assets to IKON's net assets, plus some interest associated with direct indebtedness of the Company. Interest expense on a pro forma basis for the first three months of fiscal 1996 was $10.6 million assuming that the Spin-off occurred on October 1, 1995. Foreign Operations Revenues from foreign operations increased $1.2 million to $216.2 million in fiscal 1997. Revenues from Canadian operations decreased $13.6 million to $182 million, while revenues from Mexican operations increased $13.7 million to $26.9 million and revenues from foreign sales offices (Vienna and Hong Kong) increased $1.1 million to $7.2 million. The decrease in Canadian revenues was attributable to declining paper prices, while the increase in Mexico was the result of acquisitions. Operating income from foreign operations decreased $2.3 million to $7.2 million in fiscal 1997. Canadian operating income decreased $2 million to $6.3 million due to lower paper prices. Mexican operating income was flat at $1.4 million with the increase from acquisitions being offset by a decline in paper prices. The foreign sales offices operating income decreased by $0.3 million. There was no material effect of foreign currency exchange rate fluctuations on the results of operations during the first three months of fiscal 1997 compared to the first three months of fiscal 1996. Financial Condition and Liquidity --------------------------------- Net cash provided by operating activities for the first three months of fiscal 1997 was $24.2 million. Included in operating activities were cash expenditures of $5.9 million in connection with the Company's restructuring programs. Remaining restructuring cash expenditures are estimated at $24 million. During the same period $5.7 million in cash was used for investing activities which included deferred cost expenditures of $17.7 million principally associated with the development of the Company's new Information Technology system, capital expenditures of $7.7 million and acquisition expenditures of $3.3 million. Investing activity expenditures were partially offset by proceeds received from the sale of property and the collection of notes receivable. Cash provided by - 10 - financing activities of $13.9 million included net proceeds received from borrowings under the Company's Credit Facility of $589 million offset by a $553.5 million net debt repayment to IKON and $21.6 million of other third party debt payments. On December 31,1996, total debt of $628 million was outstanding. The Company had a total of $1 billion in bank credit commitments as of December 31, 1996, of which $411 million was unused and available. In January 1997, the Company declared a dividend on its Common Stock of $.20 per share payable March 10, 1997 to shareholders of record on February 24, 1997. The Company intends to file a shelf registration for 5 million shares of common stock in February 1997, which will be primarily used for acquisitions. The Company believes that its operating cash flow, together with financing arrangements, will be sufficient to finance current operating requirements, including capital expenditures, acquisitions, other cash requirements, and future dividends. - 11 - PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K Page No. - ----------------------------------------- -------- (a) The following Exhibit is furnished pursuant to Item 601 of Regulation S-K: Exhibit No. (27) Financial Data Schedule. 15 (b) Reports on Form 8-K - none - 12 - SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. This report has also been signed by the undersigned in his capacity as the chief accounting officer of the Registrant. UNISOURCE WORLDWIDE, INC. Date February 14, 1997 /s/ Jack H. Keeney ----------------- -------------------------- Jack H. Keeney Vice President - Finance (Chief Accounting Officer) - 13 - INDEX TO EXHIBITS ----------------- Exhibit Number -------------- (27) Financial Data Schedule. - 14 - EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF UNISOURCE WORLDWIDE, INC. AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS SEP-30-1997 OCT-01-1996 DEC-31-1996 46,931,000 0 760,496,000 23,600,000 497,201,000 1,333,922,000 403,468,000 181,716,000 2,191,908,000 536,264,000 598,981,000 0 0 67,000 952,194,000 2,191,908,000 1,728,533,000 1,728,533,000 1,428,429,000 1,428,429,000 255,000,000 4,025,000 10,361,000 34,743,000 14,592,000 20,151,000 0 0 0 20,151,000 0.30 0.30
-----END PRIVACY-ENHANCED MESSAGE-----