<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) July 29, 1998
----------------
UNISOURCE WORLDWIDE, INC.
- - -------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware File No. 1-14482 13-5369500
- - -------------------------------------------------------------------------------
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
1100 Cassatt Road, Berwyn, Pennsylvania 19312
P.O. Box 3000-0935, Berwyn, Pennsylvania 19312
-----------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 296-4470
-------------------
Not Applicable
-----------------------------------------------------------------------------
(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
<PAGE>
Item 5. Other Events.
------------
On July 29, 1998, the Registrant issued the five press releases
described in Item 7 below and attached to this report.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits.
--------
(99.1) Press Release dated July 29, 1998 (Unisource Reports Third
Quarter Earnings).
(99.2) Press Release dated July 29, 1998 (Unisource Approves Regular
Quarterly Dividend, Announces Intention to Reduce Future
Dividends).
(99.3) Press Release dated July 29, 1998 (Unisource Names New Senior
Vice President of Procurement).
(99.4) Press Release dated July 29, 1998 (Unisource Announces
Restructuring Details, Plan Includes Dividend Reduction and New
Capital Structure).
(99.5) Press Release dated July 29, 1998 (Unisource Names New Senior
Vice President of Sales).
<PAGE>
SIGNATURE
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 hereunto duly authorized.
UNISOURCE WORLDWIDE, INC.
(Registrant)
By: /s/ Thomas A. Decker
------------------------------
Thomas A. Decker
Senior Vice President,
General Counsel and Secretary
Dated: July 30, 1998
<PAGE>
Exhibit Index
-------------
(99.1) Press Release dated July 29, 1998 (Unisource Reports Third
Quarter Earnings).
(99.2) Press Release dated July 29, 1998 (Unisource Approves Regular
Quarterly Dividend, Announces Intention to Reduce Future
Dividends).
(99.3) Press Release dated July 29, 1998 (Unisource Names New Senior
Vice President of Procurement).
(99.4) Press Release dated July 29, 1998 (Unisource Announces
Restructuring Details, Plan Includes Dividend Reduction and New
Capital Structure).
(99.5) Press Release dated July 29, 1998 (Unisource Names New Senior
Vice President of Sales).
<PAGE>
EXHIBIT 99.1
NEWS RELEASE
Contact
Martha A. Buckley JoAnn P. Huston
Director, Corporate Communications Manager, Investor Relations
610-722-3511 610-722-3513
[email protected] [email protected]
UNISOURCE REPORTS THIRD QUARTER EARNINGS
BERWYN, PENNSYLVANIA JULY 29, 1998 Unisource Worldwide, Inc. (NYSE:UWW)
reported today earnings of $0.11 per share for its third quarter of fiscal 1998,
which ended June 30, 1998, within the range expected by security analysts.
Those results do not reflect a $0.26 per share charge related to an extensive
restructuring plan announced by the company today. Including the charge, the
company reported a loss of $0.15 per share for the quarter.
The extensive restructuring plan is designed to improve service to
customers, decrease costs, increase financial flexibility and grow profitable
market segments. The restructuring plan is expected to significantly improve
the performance of the company in 1999 and beyond.
Revenues for the third quarter of fiscal 1998 were $1.8 billion, a 3.3%
increase over the third quarter of fiscal 1997. Excluding the restructuring
charge, operating income declined 24.9% to $24.6 million, and net income
declined 40% to $7.5 million.
"While our operating results are clearly unsatisfactory, I am pleased that
our financial management programs have generated significantly improved cash
flow," said Ray B. Mundt, chairman and chief executive officer. Cash flow from
operations for the nine months ended June 30, 1998 was $101 million, excluding
$150 million related to asset securitization. This cash generation has already
exceeded the company's forecasted operating cash flow for the year.
- more
<PAGE>
For the nine months ended June 30, 1998, revenues increased approximately
6.7% to $5.6 billion. Operating income was $85.5 million, down 19.9% from the
same period last year, while net income decreased 34.1% to $28.5 million. Both
basic and diluted earnings were $0.41 per share, 35.9% below earnings for the
first nine months of fiscal 1997. All nine-month comparisons exclude both the
special charges of $1.68 per share, related to the company's former IT
initiative and the sale of its grocery business, taken in the first quarter of
fiscal 1998 and the current restructuring charge of $0.26 per share. Including
those charges, the company reported a loss of $1.52 per share for the nine-month
period.
Unisource Worldwide, Inc. (http://www.unisourcelink.com), headquartered in
Berwyn, Pennsylvania, is one of the largest distributors of paper products and
supply systems in North America. Fiscal 1997 revenues exceeded $7 billion.
# # #
<PAGE>
UNISOURCE WORLDWIDE, INC.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended June 30
-----------------------------------------
1998 1997 % Change
----------- ----------- ----------
<S> <C> <C> <C>
Revenues
Printing and imaging $ 1,152,073 $ 1,132,829 1.7 %
Supply systems 669,343 631,212 6.0
- - ------------------------------------------------------------------------------------------
1,821,416 1,764,041 3.3
Costs and Expenses
Cost of goods sold - printing and imaging 1,000,156 973,029 2.8
Cost of goods sold - supply systems 506,375 496,601 2.0
Selling and administrative 290,304 261,686 10.9
Restructuring Charge 27,600 -
- - ------------------------------------------------------------------------------------------
1,824,435 1,731,316
- - ------------------------------------------------------------------------------------------
Income from Operations (3,019) 32,725
Interest 11,155 10,541
- - ------------------------------------------------------------------------------------------
Income Before Income Taxes (14,174) 22,184
Provision for Income Taxes (3,759) 9,650
- - ------------------------------------------------------------------------------------------
Net Income $ (10,415) $ 12,534
========== ==========
Basic Earnings Per Share $ (0.15) $ 0.19
========== ==========
Diluted Earnings Per Share $ (0.15) $ 0.19
========== ==========
Basic Shares Outstanding 68,878 67,131
========== ==========
Diluted Shares Outstanding 68,878 67,533
========== ==========
Operations Analysis:
Gross profit %, printing and imaging 13.2% 14.1%
Gross profit %, supply systems 24.3% 21.3%
Total gross profit % 17.3% 16.7%
SG&A as a % of revenues 15.9%* 14.8%
SG&A as a % of gross profit 92.2%* 88.9%
Operating income % of revenues 1.3%* 1.9%
</TABLE>
* Excludes Restructuring Charge.
<PAGE>
<TABLE>
<CAPTION>
UNISOURCE WORLDWIDE, INC.
FINANCIAL SUMMARY (in thousands, except earnings per share)
Nine Months Ended June 30
------------------------------------------
1998 1997 % Change
------------- ------------- -----------
<S> <C> <C> <C>
Revenues
Printing and imaging $ 3,544,985 $ 3,357,566 5.6 %
Supply systems 2,013,486 1,850,916 8.8
- - ----------------------------------------------------------------------------------------------------
5,558,471 5,208,482 6.7
Costs and Expenses
Cost of goods sold - printing and imaging 3,082,782 2,874,762 7.2
Cost of goods sold - supply systems 1,524,748 1,447,226 5.4
Selling and administrative 865,442 779,726 11.0
Special charge (1) 168,000 -
Restructuring charge (2) 27,600 -
- - ---------------------------------------------------------------------- ----------------------------
5,668,572 5,101,714
- - ---------------------------------------------------------------------- ----------------------------
(Loss) Income from Operations (110,101) 106,768
Interest 35,898 30,932
- - ---------------------------------------------------------------------- ----------------------------
(Loss) Income Before Income Taxes (145,999) 75,836
(Benefit) Provision for Income Taxes (3) (41,658) 32,603
- - ---------------------------------------------------------------------- ----------------------------
Net (Loss) Income $ (104,341) $ 43,233
========== ==========
Basic (Loss) Earnings Per Share (4) $ (1.52) $ 0.64
========== ==========
Diluted (Loss) Earnings Per Share (4) $ (1.52) $ 0.64
========== ==========
Basic Shares Outstanding 68,662 67,074
========== ==========
Diluted Shares Outstanding 68,662 (5) 67,735
========== ==========
Operations Analysis:
Gross profit %, printing and imaging 13.0% 14.4%
Gross profit %, supply systems 24.3% 21.8%
Total gross profit % 17.1% 17.0%
SG&A as a % of revenues 15.6%* 15.0%
SG&A as a % of gross profit 91.0%* 88.0%
Operating income % of revenues 1.5%* 2.0%
* Excludes Special Charge and Restructuring Charge.
(1) Represents write-off of capitalized development and related costs associated with NADS.
(2) Represents restructuring charge associated with streamlining the Company's organizational
structure.
(3) Includes a $5.7 million tax charge related to non-deductible intangible assets
associated with the sale of a significant portion of the Company's United States
based Grocery Supply Systems business.
(4) The special charge in fiscal 1998 amounted to an after-tax loss of $109 million
(($1.60) per share). The tax charge associated with the sale of the Grocery Supply
Systems amounted to a loss of ($0.08) per share and the restructuring charge amounted to
an after-tax loss of $17.9 million ($0.26 per share).
(5) Diluted shares outstanding exclude the impact of stock options due to the antidilutive
effect on the loss per share.
</TABLE>
<PAGE>
This schedule presents the financial results of Unisource Worldwide, Inc.
excluding a $27.6 million, $17.9 million net of tax ($0.26 per share)
restructuring charge associated with streamlining the Company's organizational
structure.
UNISOURCE WORLDWIDE, INC.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended June 30
--------------------------------------------
1998 1997 % Change
----------- ----------- ------------
<S> <C> <C> <C>
Revenues
Printing and imaging $ 1,152,073 $ 1,132,829 1.7 %
Supply systems 669,343 631,212 6.0
- - -------------------------------------------------------------------------------------
1,821,416 1,764,041 3.3
Costs and Expenses
Cost of goods sold - printing and imaging 1,000,156 973,029 2.8
Cost of goods sold - supply systems 506,375 496,601 2.0
Selling and administrative 290,304 261,686 10.9
- - -------------------------------------------------------------------------------------
1,796,835 1,731,316
- - -------------------------------------------------------------------------------------
Income from Operations 24,581 32,725 (24.9)
Interest 11,155 10,541
- - -------------------------------------------------------------------------------------
Income Before Income Taxes 13,426 22,184
Provision for Income Taxes 5,907 9,650
- - -------------------------------------------------------------------------------------
Net Income $ 7,519 $ 12,534 (40.0)
========== ==========
Basic Earnings Per Share $ 0.11 $ 0.19 (0.42)
========== ==========
Diluted Earnings Per Share $ 0.11 $ 0.19 (0.42)
========== ==========
Basic Shares Outstanding 68,878 67,131
========== ==========
Diluted Shares Outstanding 68,878 67,533
========== ==========
Operations Analysis:
Gross profit %, printing and imaging 13.2% 14.1%
Gross profit %, supply systems 24.3% 21.3%
Total gross profit % 17.3% 16.7%
SG&A as a % of revenues 15.9% 14.8%
SG&A as a % of gross profit 92.2% 88.9%
Operating income % of revenues 1.3% 1.9%
</TABLE>
This information is provided for additional analysis and is not intended to be
a presentation in accordance with generally accepted accounting principles.
<PAGE>
This schedule presents the financial results of Unisource Worldwide, Inc.
excluding a special charge in fiscal 1998 of $168 million, $109 million net of
tax ($1.60 per share) related to the write-off of capitalized development and
related costs associated with NADS, a tax charge of $5.7 million ($0.08 loss per
share) associated with the sale of a significant portion of its U.S.- based
Grocery Supply Systems business and a $27.6 million, $17.9 million net of tax
($0.26 per share) charge associated with streamlining the Company's
organizational structure.
UNISOURCE WORLDWIDE, INC.
FINANCIAL SUMMARY (in thousands, except earnings per share)
<TABLE>
<CAPTION>
Nine Months Ended June 30
--------------------------------------------
1998 1997 % Change
------------ ------------ ---------
<S> <C> <C> <C>
Revenues
Printing and imaging $ 3,544,985 $ 3,357,566 5.6 %
Supply systems 2,013,486 1,850,916 8.8
- - ----------------------------------------------------------------------------------------------------------
5,558,471 5,208,482 6.7
Costs and Expenses
Cost of goods sold - printing and imaging 3,082,782 2,874,762 7.2
Cost of goods sold - supply systems 1,524,748 1,447,226 5.4
Selling and administrative 865,442 779,726 11.0
- - ----------------------------------------------------------------------------------------------------------
5,472,972 5,101,714
- - ----------------------------------------------------------------------------------------------------------
Income from Operations 85,499 106,768 (19.9)
Interest 35,898 30,932
- - ----------------------------------------------------------------------------------------------------------
Income Before Income Taxes 49,601 75,836
Provision for Income Taxes 21,108 32,603
- - ----------------------------------------------------------------------------------------------------------
Net Income $ 28,493 $ 43,233 (34.1)
=========== ===========
Basic Earnings Per Share $ 0.41 $ 0.64 (35.9)
=========== ===========
Diluted Earnings Per Share $ 0.41 $ 0.64 (35.9)
=========== ===========
Basic Shares Outstanding 68,662 67,074
=========== ===========
Diluted Shares Outstanding 68,877 67,735
=========== ===========
Operations Analysis:
Gross profit %, printing and imaging 13.0% 14.4%
Gross profit %, supply systems 24.3% 21.8%
Total gross profit % 17.1% 17.0%
SG&A as a % of revenues 15.6% 15.0%
SG&A as a % of gross profit 91.0% 88.0%
Operating income % of revenues 1.5% 2.0%
</TABLE>
This information is provided for additional analysis and is not intended to be a
presentation in accordance with generally accepted accounting principles.
<PAGE>
UNISOURCE WORLDWIDE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUES AND SHARES)
<TABLE>
<CAPTION>
ASSETS JUNE 30, SEPTEMBER 30,
1998 1997
- - -------------------------------------------------------------------- -------------------- -------------------
CURRENT ASSETS
<S> <C> <C>
CASH $ 47,884 $ 45,384
ACCOUNTS RECEIVABLE, NET 620,607 882,360
INVENTORIES 430,313 495,330
PREPAID EXPENSES AND DEFERRED TAXES 58,726 49,875
-------------------- -------------------
TOTAL CURRENT ASSETS 1,157,530 1,472,949
-------------------- -------------------
LONG-TERM RECEIVABLES 5,531 7,790
PROPERTY AND EQUIPMENT, AT COST 436,946 434,762
LESS ACCUMULATED DEPRECIATION 205,016 188,336
-------------------- -------------------
231,930 246,426
-------------------- -------------------
GOODWILL 641,463 668,575
DEFERRED COSTS AND OTHER ASSETS 17,688 163,092
-------------------- -------------------
$2,054,142 $2,558,832
==================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES
CURRENT PORTION OF LONG-TERM DEBT $ 1,165 $ 638
NOTES PAYABLE 11,344 144,882
TRADE ACCOUNTS PAYABLE 426,393 498,503
ACCRUED SALARIES, WAGES AND COMMISSIONS 32,559 33,906
RESTRUCTURING COSTS 12,847 8,172
OTHER ACCRUED EXPENSES 85,891 119,431
-------------------- -------------------
TOTAL CURRENT LIABILITIES 570,199 805,532
-------------------- -------------------
LONG-TERM DEBT 586,482 661,350
OTHER LIABILITIES
DEFERRED TAXES 19,578 61,082
RESTRUCTURING COSTS 7,210 8,383
OTHER LONG-TERM LIABILITIES 37,872 38,100
-------------------- -------------------
64,660 107,565
-------------------- -------------------
STOCKHOLDERS' EQUITY
COMMON STOCK, PAR VALUE $0.001, AUTHORIZED -
250,000,000 SHARES, ISSUED AND OUTSTANDING; 6/30/98 -
69,732,048 SHARES; 9/30/97 - 68,792,842 SHARES 70 69
ADDITIONAL PAID IN CAPITAL 831,757 820,213
UNEARNED COMPENSATION (8,927) (5,845)
RETAINED EARNINGS 53,979 199,828
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (43,975) (29,320)
COST OF COMMON SHARES IN TREASURY; 6/30/98 - 7,493 SHARES;
9/30/97 - 32,027 SHARES (103) (560)
-------------------- -------------------
832,801 984,385
-------------------- -------------------
$2,054,142 $2,558,832
==================== ===================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
UNISOURCE WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended June 30,
------------------------------------------------
1998 1997
------------------------------------------------
<S> <C> <C>
Operating Activities
Net (loss) income $ (10,415) $ 12,534
Additions (deductions) to reconcile net income
to net cash provided by operating activities:
Depreciation 9,424 7,501
Amortization 4,955 4,278
Provision for losses on accounts receivable 4,910 3,811
Restructuring charge 27,600 -
Deferred tax benefit (3,150) -
Payments for restructuring and special charges 13,314 (3,067)
Changes in operating assets and liabilities, net
of effects from acquisitions and divestitures:
Decrease (increase) in accounts receivable 35,620 (1,708)
Decrease (increase) in inventories 49,006 (3,909)
(Increase) decrease in prepaid expenses (6,277) 6,033
(Decrease) increase in accrued and deferred
income taxes (3,120) 821
(Decrease) increase in accounts payable and
accrued expenses (30,424) 18,635
Miscellaneous 1,810 948
----------------------- -----------------
Net cash provided by operating activities 65,905 45,877
----------------------- -----------------
Investing Activities
Proceeds from the sale of property and equipment 12,856 2,009
Proceeds from divestitures 11,386 -
Cost of companies acquired, net of cash acquired (2,938) (34,251)
Expenditures for property and equipment (4,352) (7,967)
Collection of notes receivable - 472
Deferred cost expenditures (2,303) (11,817)
------------------------ ----------------
Net cash provided by (used in) investing activities 14,649 (51,554)
------------------------ ----------------
Financing Activities
Debt (repayments) proceeds (1,260) 594
Proceeds (repayments) from revolving credit facility
borrowings, net (77,308) 38,490
Proceeds from IKON - (517)
Payment of dividends (13,888) (13,455)
Stock issuances (repurchases) 7,456 (1,198)
------------------------ ----------------
Net cash (used in) provided by financing activities (85,000) 23,914
------------------------ ----------------
Net (decrease) increase in cash (4,446) 18,237
Cash at beginning of period 52,330 41,081
------------------------ ----------------
Cash at end of period $ 47,884 $ 59,318
======================= ===============
</TABLE>
<PAGE>
UNISOURCE WORLDWIDE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------------
1998 1997
--------------------------------
<S> <C> <C>
Operating Activities
Net (loss) income $(104,341) $ 43,233
Additions (deductions) to reconcile net income
to net cash provided by operating activities:
Depreciation 27,058 22,582
Amortization 15,906 12,474
Provision for losses on accounts receivable 10,439 13,657
Special and restructuring charges 195,600 -
Deferred tax benefit (48,650) -
Loss on divestiture 5,700 -
Payments for special and restructuring charges (22,946) (11,498)
Changes in operating assets and liabilities, net
of effects from acquisitions and divestitures:
Sale of accounts receivable 150,000 -
Other changes in accounts receivable 83,945 27,323
Decrease in inventories 32,742 4,269
(Increase) decrease in prepaid expenses (12,341) 10,961
(Decrease) increase in accrued and deferred
income taxes (16,019) 18,702
Decrease in accounts payable and
accrued expenses (65,962) (21,443)
Miscellaneous 40 (64)
------------ ------------
Net cash provided by operating activities 251,171 120,196
------------ ------------
Investing Activities
Proceeds from the sale of property and equipment 13,795 7,823
Proceeds from divestitures 59,512 -
Cost of companies acquired, net of cash acquired (49,017) (51,017)
Expenditures for property and equipment (24,019) (21,070)
Collection of notes receivable - 21,577
Deferred cost expenditures (13,976) (37,462)
------------ ------------
Net cash used in investing activities (13,705) (80,149)
------------ ------------
Financing Activities
Debt repayments (148,319) (38,154)
Proceeds (repayments) from revolving credit facility
borrowings, net (54,051) 624,600
Repayment to IKON - (553,700)
Payment of dividends (41,515) (26,873)
Stock issuances (repurchases) 8,919 (1,198)
------------ ------------
Net cash (used in) provided by financing activities (234,966) 4,675
------------ ------------
Net increase in cash 2,500 44,722
Cash at beginning of year 45,384 14,596
------------ ------------
Cash at end of period $ 47,884 $ 59,318
============ ============
</TABLE>
<PAGE>
EXHIBIT 99.2
News Release
Contact
Martha A. Buckley JoAnn P. Huston
Director, Corporate Communications Manager, Investor Relations
610-722-3511 610-722-3513
[email protected] [email protected]
UNISOURCE WORLDWIDE, INC.
APPROVES REGULAR QUARTERLY DIVIDEND
ANNOUNCES INTENTION TO REDUCE FUTURE DIVIDENDS
BERWYN, PENNSYLVANIA JULY 29, 1998 The board of directors of Unisource
Worldwide, Inc. (NYSE:UWW) today approved a dividend on its Common Stock of
20 cents per share payable September 10, 1998, to common shareholders of record
at the close of business on August 24, 1998.
In conjunction with an extensive restructuring plan announced today by
Unisource, the board also announced its intention to reduce future quarterly
dividends to $.05 per share, beginning with the dividend payable in December
1998. "Our board determined that the funds currently being allocated to
dividends would serve shareholders better if reinvested in the future growth of
our company," said Ray B. Mundt, chairman and chief executive officer.
Unisource Worldwide, Inc. (http://www.unisourcelink.com), headquartered in
Berwyn, Pennsylvania, is one of the largest distributors of paper products and
supply systems in North America. Fiscal 1997 revenues exceeded $7 billion.
# # #
<PAGE>
EXHIBIT 99.3
News Release
Contact
Martha A. Buckley JoAnn P. Huston
Director, Corporate Communications Manager, Investor Relations
610-722-3511 610-722-3513
[email protected] [email protected]
UNISOURCE NAMES NEW
SENIOR VICE PRESIDENT OF PROCUREMENT
BERWYN, PENNSYLVANIA - JULY 29, 1998 - Unisource Worldwide, Inc. (NYSE:UWW)
announced today it has named George Timchal to the newly-created position of
senior vice president of procurement.
Mr. Timchal, who is currently vice president of sourcing and procurement
for Sunbeam Corporation, will head the centralized purchasing function that is
being created as part of the extensive restructuring plan announced today by
Unisource. The new department will develop strategic positioning with suppliers
to combine their product development resources with Unisource's marketing power.
These supplier partnerships, coupled with an overall consolidation and
rationalization of the supply base, will enable Unisource to lower its total
cost of procurement and bring new and improved products through its extensive
distribution network for the benefit of all the members of the supply chain.
The new department will also negotiate contracts for procurement of general,
administrative and controllable goods and services.
"George Timchal is a strategic business leader who has demonstrated his
ability to direct, implement and succeed at change," said Ray B. Mundt, chairman
and chief executive officer. "He has significant experience not only in
procurement and global sourcing, but also in restructuring and growth
initiatives, as well as acquisition integration and information technology
systems. I am extremely pleased that he has chosen to join our senior
management team as we position our company for consistent, profitable growth."
Mr. Timchal, who attended Philadelphia's Drexel University, began his
career as a procurement manager for a wholesale distribution company in Southern
New Jersey. He joined Scott Paper Company in 1986, where he held positions in
manufacturing and
- more -
operations prior to being named Scott's Director of Procurement in 1992. He
joined Sunbeam in 1996, where his responsibilities included procurement and
integration of operations for the company and several of its acquisitions.
<PAGE>
Unisource Worldwide, Inc. (http://www.unisourcelink.com), headquartered in
Berwyn, Pennsylvania, is one of the largest distributors of paper products and
supply systems in North America. Fiscal 1997 revenues exceeded $7 billion.
# # #
<PAGE>
EXHIBIT 99.4
NEWS RELEASE
Contact
Martha A. Buckley JoAnn P. Huston
Director, Corporate Communications Manager, Investor Relations
610-722-3511 610-722-3513
[email protected] [email protected]
UNISOURCE ANNOUNCES RESTRUCTURING DETAILS
Plan Includes Dividend Reduction and New Capital Structure
BERWYN, PENNSYLVANIA - JULY 29, 1998 - Unisource Worldwide, Inc. (NYSE:UWW)
announced today details of an extensive restructuring plan designed to improve
service to customers, decrease costs, increase financial flexibility and grow
profitable market segments. "The changes we are making to improve the company's
operating and financial performance are substantial and, as the plan is
implemented, will dramatically enhance the value of Unisource," commented Ray B.
Mundt, chairman and chief executive officer.
The restructuring plan includes a reduction of more than 1,500 employees
across all business functions, or approximately 15% of the company's U.S.
workforce, and approximately 20% of its U.S. warehouse space. As a result of
the restructuring, the company will take a pre-tax charge of $130-$150 million
in fiscal 1998 and will incur one-time implementation expenses of $50-$60
million over the following two years. When fully implemented in 2001, the plan
is expected to result in annual operating income improvement of $150-$170
million, which would approximately double the total operating income reported
for fiscal 1997.
The company forecasts that cumulative operating income benefits over the
next two years will exceed the combined restructuring and implementation costs
of $180-$210 million. The plan also projects permanent cash flow improvement of
$30-$50 million from reduced inventory investment.
The restructuring charge will be taken over two consecutive quarters:
* $28 million ($18 million after tax) in the third quarter, reflecting closures
or sales of facilities initiated during that quarter
- more -
<PAGE>
* $102-$122 million ($66-$79 million after tax) in the fourth quarter,
reflecting severance; facility closures; inventory write-down due to closure of
facilities, discontinuation of certain product lines and rationalization of
vendors and SKUs; and anticipated restructuring of the company's Canadian and
Mexican operations
Implementation costs of $50-$60 million will cover relocation, recruitment,
training, duplicate manning during the transition, and IT consolidation expenses
related to the restructuring.
A final determination of the amounts of the charge and implementation costs
depend on work presently in process to refine the requirements for Canada and
Mexico and to complete an analysis of the inventory impact. This work will be
completed in the current quarter and announced prior to fiscal year-end.
Major Restructuring Elements
The plan announced today is comprised of six major initiatives:
* Organizing into fourteen strategic market areas in the U.S.
This new structure will replace the company's current regional/divisional
structure, consisting of 150+ autonomous operating units, with fourteen market
areas, while integrating acquired companies into its core operations.
* Functionally aligning the sales and distribution responsibilities within
market areas.
Each of the new market areas will be managed by two vice presidents- one
responsible for all sales functions, and one to oversee all warehousing and
distribution activities within that same market area. Each will report to a
senior vice president at the corporate level, but will share common goals and
incentives to promote common objectives. The Sales and Distribution structure
will be supported at the corporate level by newly-created Procurement and
Marketing organizations.
* Creation of an efficient "hub and spoke" distribution network that reduces
the total number of locations by 40% and reduces warehouse space by nearly 20%.
Facility consolidations will reduce the total number of Unisource locations
from 424 to 253, and will eliminate three million square feet of warehouse
space. The new structure will significantly improve warehouse productivity,
while allowing Unisource to continue to offer next-day delivery to customers
throughout the United States.
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<PAGE>
* Establishment of a new corporate marketing function to drive focused
marketing initiatives throughout the organization.
This new corporate department will utilize economic data, industry research
and market analysis to develop strategy and detailed marketing plans for each
product category and customer segment. Corporate Marketing will also manage
brand strategy and provide advertising and promotional support to the sales
effort in each market area.
* Creation of a corporate procurement department to direct company-wide
purchasing and national contracts.
The new procurement function will take full advantage of the company's size
and national presence to reduce its total cost of procurement. Procurement
will also develop strategic positioning with suppliers to combine their
product development resources with Unisource's marketing power for the benefit
of all the members of the supply chain.
* Expansion of the company's successful Customer Service Center concept.
Unisource will integrate all of its customer service activities into 21
strategically-located customer service centers, building on the success of the
customer service centers created several years ago. The 21 centers will
consist of 11 existing centers, which will continue to serve customers within
their market areas, along with 10 new centers, which will consolidate
currently-dispersed customer service activities, primarily within recently-
acquired operations. This strategy will enhance overall customer service
capabilities and facilitate communications between the company's sales and
customer service organizations.
In conjunction with its new organizational structure, Unisource today
announced two appointments to its senior management team. Kenneth F. Vuylsteke,
who joined Unisource as a result of the National Sanitary Supply acquisition,
was named senior vice president of sales. George Timchal, currently vice
president of sourcing and procurement for Sunbeam Corp., was named senior vice
president of procurement.
The company is also instituting an extensive customer analysis designed to
assess customer profitability and develop appropriate pricing, service and
delivery levels. The goal of this process is to work with customers to ensure a
fair return for the value offered. However, the analysis is likely to result in
some lost sales.
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<PAGE>
FINANCIAL IMPACT
The business impact of the anticipated changes, combined with the elimination of
unprofitable business, could result in a net revenue decline of $500-$700
million in 1999. Depending on the amount of the revenue decline, additional
positions could be impacted. However, upon full implementation, the plan will
have a significant positive effect on the company's financial performance,
resulting in an estimated annualized increase in operating income of $150-$170
million, with a return on shareholders equity approaching 14% and a return on
capital of nearly 10% by the end of the year 2000.
The major components of that increase are shown below.
Forecasted Impact of Restructuring on Operating Income
------------------------------------------------------
<TABLE>
<CAPTION>
(Millions) Comments
---------- --------------------------------------------
<S> <C> <C> <C> <C> <C>
Manning Reductions $ 80 - $ 85 1,500+ people
Facility Costs 25 - 25 3 million square feet
Other Expenses 30 - 40 T&E, supplies, freight, telephone
-------------- ------------
Total SG&A $135 - $150
Strategic Purchasing 30 - 40 1.5% savings on US warehouse purch.
Business Impact (15) - (20)
-------------- ------------
Operating Income Impact $150 - $170
============== ============
</TABLE>
The plan will enable the company to reduce its inventory investment by $30-
$50 million from June 30, 1998 levels. Unisource has already made significant
progress in reducing inventory, achieving an $87 million reduction since
December 31, 1997.
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<PAGE>
TIMING
Mundt reported that the company will begin implementing the restructuring
plan immediately and plans to complete the majority of the closures and manning
reductions within the next twelve months. "We should begin to realize the
financial benefits of our restructuring efforts by the second half of fiscal
1999," Mundt said.
"Through a combination of increased gross trading margins and reduced
expenses, we expect to achieve our goal run rate of 80% expense-to-gross profit
ratio by the end of our fourth fiscal quarter of 1999," Mundt continued.
DIVIDEND
Separately, the Unisource board of directors declared its regular quarterly
dividend of $.20 a share for the fourth quarter of fiscal 1998. The $.20
dividend will be paid on September 10 to holders of record as of August 24,
1998.
Additionally, the board announced its intention to reduce future quarterly
dividends to $.05 per share, beginning with the dividend payable in December
1998. "Our Board determined that the funds currently being allocated to
dividends would serve shareholders better if reinvested in the future growth of
our company," Mundt said.
CAPITAL STRUCTURE
The Board of Directors approved an amendment to the company's bank credit
facility, as well as the issuance of $300 million of senior subordinated 10-year
notes anticipated to be sold to institutional investors in September. The
amendment will reduce the amount of the credit facility from $1 billion to $900
million and will permit more flexible financial covenants. The immediate
reduction of $100 million is due to the strength of the company's cash flow and
the expectation that this additional borrowing capacity will not be needed.
The amount of the facility will be further reduced to $600 million when the note
proceeds are received. The company's lenders have approved a covenant waiver
through September 30, 1998 and the final amendment is expected to be completed
in early September.
Interest costs are forecast to increase in fiscal 1999 by $8 to $10
million, due to higher rates associated with the long-term financing and an
expected increase in the pricing of the company's credit facility.
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<PAGE>
SUMMARY
"Our restructuring plan will reduce our costs, increase our profitability,
and put us back on the path of consistent growth," Mundt said. "Our operations
will be leaner and stronger and our revised capital structure will provide us
with the strength and flexibility to make appropriate investments for profitable
growth."
Unisource Worldwide, Inc.(http://www.unisourcelink.com) headquartered in
Berwyn, Pennsylvania, is one of the largest distributors of paper products and
supply systems in North America. Fiscal 1997 revenues exceeded $7 billion.
The senior subordinated notes that Unisource anticipates selling to
institutional investors in September 1998 have not been and will not be
registered under the Securities Act of 1933 and may not be offered or sold in
the United States absent registration or an applicable exemption from
registration requirements.
All statements, other than statements of historical fact, made in this press
release, including, without limitation, (i) statements relating to the
implementation of the restructuring plan and the timing thereof (such as the
planned increase of customer service centers and planned reduction of employees,
number of locations, warehouse space, and inventory investment), the projected
costs and expenses associated with the restructuring plan and the implementation
thereof, the projected impact of, and financial results and benefits to be
realized from, such restructuring (such as projected decreased procurement and
operating costs, increased warehouse productivity, increased operating income,
increased cash flow, increased gross trading margins, reduced expense-to-gross
profit ratio, increased profitability, and improved return on shareholders
equity and return on capital), and the other projected ramifications of the
restructuring plan (such as the anticipated loss of customers and decrease in
revenues), (ii) statements relating to the payment of future dividends not yet
declared, the consummation of the amendment to the company's credit facility,
the issuance of senior subordinated notes, and other proposed future actions,
and (iii) statements qualified by the words "believes," "anticipates,"
"expects," "intends," "may," "estimates," "will," and other words similar
thereto, are forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
Although the company believes these statements are based upon reasonable
assumptions with respect to future events and circumstances, such statements are
subject to risks and uncertainties which could cause actual results or
circumstances to differ materially. Such risks and uncertainties include,
without limitation, delays, difficulties, or increased costs associated with the
implementation of the restructuring plan, the consummation of the proposed
amendment of its credit facility, the issuance of the senior subordinated notes,
leverage and debt service requirements (including sensitivity to interest rate
fluctuations), operating in a competitive environment, general economic
conditions, the ability to attract and retain qualified personnel, changes or
volatility in pulp and paper prices, and delays or difficulties with
consolidation of its information technology systems and the upgrading of such
systems to be year 2000 compliant. For further detail and information
concerning such risks and uncertainties, please consult Part I, Item 1, of the
company's annual report on Form 10-K for the fiscal year ended September 30,
1997, which is on file with the Securities and Exchange Commission.
# # #
<PAGE>
EXHIBIT 99.5
News Release
Contact
Martha A. Buckley JoAnn P. Huston
Director, Corporate Communications Manager, Investor Relations
610-722-3511 610-722-3513
[email protected] [email protected]
UNISOURCE NAMES NEW
SENIOR VICE PRESIDENT OF SALES
Berwyn, Pennsylvania- July 29, 1998 - Unisource Worldwide, Inc. (NYSE:UWW)
announced today that it has appointed Kenneth F. Vuylsteke to the newly-created
position of senior vice president of sales. In his new position, Mr. Vuylsteke
will assume management responsibility for all Unisource sales and service
nationwide, including customer service and national accounts as well as
Unisource's specialty companies and Paper Plus stores.
Mr. Vuylsteke is currently executive vice president in charge of western
operations for National Sanitary Supply (NSS), a company acquired by Unisource
in September, 1997.
"Ken has been a key driver of the professionalism and discipline that has
distinguished National Sanitary Supply in the marketplace," said Ray B. Mundt,
chairman and chief executive officer of Unisource. " He has an outstanding
track record of generating profitable sales, and his leadership will prove
invaluable in driving a strategic approach to sales throughout Unisource."
Ken joined NSS in 1989 as vice president and general manager of the
company's northwest division and was promoted to executive vice president in
1992. His experience also includes senior sales and marketing positions with
James River Corp. and Crown Zellerbach. He holds a combined degree in marketing
and economics from Pacific Lutheran University and has served in the U. S.
Marine Corps.
Unisource Worldwide, Inc. (http:/www.unisourcelink.com), headquartered in
Berwyn, Pennsylvania, is one of the largest distributors of paper products and
supply systems in North America. Fiscal 1997 revenues exceeded $7 billion.
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