<PAGE>
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal year ended December 31, 1998
------------------
- OR -
[_] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ________________
Commission file number _____________
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below: UNISOURCE WORLDWIDE, INC. RETIREMENT
SAVINGS PLAN.
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office: UNISOURCE WORLDWIDE, INC.,
1100 CASSATT ROAD, BERWYN, PENNSYLVANIA, 19312.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
Date: June 29, 1999
UNISOURCE WORLDWIDE, INC.
RETIREMENT SAVINGS PLAN
(Name of Plan)
By: /s/ Allister H. McCree, Jr.
-----------------------------
Allister H. McCree, Jr.
Plan Administrator
<PAGE>
Financial Statements and
Supplemental Schedules
Unisource Worldwide, Inc.
Retirement Savings Plan
Years ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Financial Statements and Supplemental Schedules
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors............................................... 1
Audited Financial Statements
Statements of Net Assets Available for Benefits.............................. 2
Statements of Changes in Net Assets Available for Benefits................... 3
Notes to Financial Statements................................................ 4
Supplemental Schedules
Line 27a - Schedule of Assets Held for Investment Purposes................... 15
Line 27d - Schedule of Reportable Transactions............................... 16
<PAGE>
Report of Independent Auditors
The Trustee
Unisource Worldwide, Inc.
Retirement Savings Plan
We have audited the accompanying statements of net assets available for benefits
of the Unisource Worldwide, Inc. Retirement Savings Plan as of December 31, 1998
and 1997, and the related statements of changes in net assets available for
benefits for the years then ended. These financial statements are the
responsibility of the Plan'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 financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Unisource
Worldwide, Inc. Retirement Savings Plan at December 31, 1998 and 1997, and the
changes in its net assets available for benefits for the years then ended, in
conformity with generally accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
held for investment purposes as of December 31, 1998 and reportable transactions
for the year then ended, are presented for purposes of additional analysis and
are not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental schedules have been subjected to the auditing procedures
applied in our audits of the financial statements and, in our opinion, are
fairly stated in all material respects in relation to the financial statements
taken as a whole.
/s/ Ernst & Young LLP
Philadelphia, PA
June 24, 1999
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Statements of Net Assets Available for Benefits
<TABLE>
<CAPTION>
December 31
1998 1997
-----------------------------------
<S> <C> <C>
Assets
Investments:
Cash and cash equivalents $ 49,719,672 $ 19,125,121
IKON Office Solutions, Inc. common stock 30,028,188 119,959,252
Unisource Worldwide, Inc. common stock 48,772,236 52,427,043
Investment funds 157,626,753 115,210,379
Participant loans 9,585,393 10,612,827
-----------------------------------
295,732,242 317,334,622
Transfers receivable from merged plans 69,467 2,250,768
Investment income receivable 844,718 734,020
Contributions and other receivables 135,558 573,937
-----------------------------------
296,781,985 320,893,347
Liabilities
Cash overdraft 486,637 -
Pending security transactions 879,007 -
Accrued administrative expenses 1,046,535 160,252
-----------------------------------
Net assets available for benefits $ 294,369,806 $ 320,733,095
===================================
</TABLE>
See accompanying notes.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Statements of Changes in Net Assets Available for Benefits
<TABLE>
<CAPTION>
Year ended December 31
1998 1997
-----------------------------------
<S> <C> <C>
Additions:
Transfer of assets from IKON Office
Solutions, Inc. Retirement Savings Plan $ - $ 361,438,780
Employee contributions 24,092,971 23,697,437
Employer contributions 12,652,297 11,447,955
Assets transferred or receivable from merged plans 53,469,506 16,365,244
Dividend income 5,156,303 4,455,867
Interest income 5,542,673 4,150,020
-----------------------------------
Total additions 100,913,750 421,555,303
Deductions:
Benefits paid to participants 33,623,214 30,300,381
Administrative expenses 2,133,260 1,045,997
-----------------------------------
Total deductions 35,756,474 31,346,378
Realized and unrealized loss on investments (91,520,565) (69,475,830)
-----------------------------------
Net (decrease) increase (26,363,289) 320,733,095
Net assets available for benefits at beginning of period 320,733,095 -
-----------------------------------
Net assets available for benefits at end of period $ 294,369,806 $ 320,733,095
===================================
</TABLE>
See accompanying notes.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements
December 31, 1998
1. Significant Accounting Policies
Employee contributions and related employer required matching contributions are
recognized when employee contribution amounts are withheld from the employees'
pay.
The market values of the IKON Office Solutions, Inc. ("IKON") and Unisource
Worldwide, Inc. ("Unisource") common stock are determined by use of the last
reported sales price on the last business day of the year, as reported on a
national securities exchange.
Cash equivalents are valued at cost, which is equal to market value. All highly
liquid investments with maturities of three months or less when purchased are
considered to be cash equivalents.
Investment funds consist of the Stable Value Fund, Vanguard Institutional Index
Fund, Balanced Fund, PBHG Growth Fund, American Funds' EuroPacific Growth Fund,
Vanguard Windsor II Fund, PIMCO Mid-Cap Growth Fund, and BlackRock Small-Cap
Value Fund.
The guaranteed investment contracts, held in the Stable Value Fund, are valued
at contract value, which approximates fair value, as established by the issuing
financial institution. Contract value represents contributions made under the
contract, plus interest at the contract rate, less funds used for withdrawals.
Contract interest rates ranged from 5.4% to 6.7% and 5.5% to 6.7% for the years
ended December 31, 1998 and 1997, respectively.
Investments in the Vanguard Institutional Index Fund, Balanced Fund, PBHG Growth
Fund, American Funds' EuroPacific Growth Fund, Vanguard Windsor II Fund, PIMCO
Mid-Cap Growth Fund, and BlackRock Small-Cap Value Fund are stated at fair
market value, which is determined on the last day of the plan year based on the
portfolio of investments owned by the particular funds on that date. Participant
loans are valued at their outstanding balances, which approximate fair value.
Realized and unrealized gain or loss on investments represents the difference
between the proceeds received and the cost of investments sold and the change in
the difference between December 31 market value and cost of investments.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates and assumptions.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of the Plan
On June 19, 1996, Alco Standard Corporation announced that it would separate
Unisource Worldwide, Inc. (the "Company"), its printing and imaging and supply
systems distribution business, from IKON, its office solutions business, with
each business operating as a stand-alone, publicly traded company. Following the
spin-off of the Company, which was completed on December 31, 1996, the Plan,
covering eligible employees of the Company, was established effective January 1,
1997. Net assets of the Plan of $361,438,780, equal to the aggregate account
balances of active employees of the Company on January 2, 1997, were transferred
to the Plan in January 1997.
The Plan is a defined contribution plan. Participation is limited to full-time
and part-time non-union employees of Unisource.
The Plan allows participants to contribute 1% to 16% of annual salaries or
wages. Contributions are limited by the maximum amount allowable under the
Internal Revenue Code. Participants are immediately vested in their
contributions.
The Company (the employer) contributes an amount equal to two-thirds of the
first 6% of annual regular salaries or wages that a participant contributes to
the Plan. The employer's contribution vests with the participant at 25% per year
beginning with the participant's second year of service so that full vesting
occurs after five years of service. The participant is also fully vested in the
employer's contributions upon retirement, position termination due to permanent
shutdown of plant or department, total and permanent disability, or death.
The Plan allows participant contributions (and any investment income earned
thereon) to be allocated between investments in Unisource common stock or any of
the available investment funds. Participants may change investment allocations
at any time. Employer matching contributions are made in Unisource common stock
and may not be redirected to any of the other available investment options until
the participant attains age 55. Additional investments in IKON common stock
(which were transferred into the Plan in January 1997, as described above, from
the accounts of employees who formerly worked for IKON) are not permitted.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
The following is a brief description of the investment funds in which
participants may direct their contributions.
Stable Value Fund - Funds are invested in fixed income investments. The fund
is managed by The Vanguard Group.
Vanguard Institutional Index Fund - Funds are invested solely in the 500
publicly traded stocks in the Standard & Poor's Composite Stock Price Index.
The fund is managed by The Vanguard Group.
Balanced Fund - Funds are invested equally in the Stable Value Fund and
Vanguard Institutional Index Fund.
PBHG Growth Fund - Funds are invested primarily in the common stocks of
companies with small capitalization and a potential for strong earnings'
growth. The fund is managed by Pilgrim Baxter & Associates.
American Funds' EuroPacific Growth Fund - Funds are invested in companies
located primarily in Europe and the Pacific Basin. The objective of the
fund, which is managed by Capital Research and Management Company, is long-
term growth of capital.
Vanguard Windsor II Fund - Funds are invested in a diversified group of over
200 undervalued or out-of-favor stocks of large companies. The Fund's
primary objective is long-term capital appreciation. The Fund is managed by
the Vanguard Group.
PIMCO Mid-Cap Growth Fund - Funds are invested in the stock of about 60 to
100 mid-sized companies that exhibit strong growth and are reasonably valued
compared to the market. The Fund seeks long-term growth of capital. The fund
is managed by PIMCO.
BlackRock Small-Cap Value Fund - Funds are invested in stocks of small
capitalization U.S. Companies and is designed for investors aggressively
seeking long-term capital appreciation. The BlackRock Small-Cap Value Fund
is managed by PFPC.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of the Plan (continued)
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum of $50,000 or 50% of their vested account balance, whichever is less.
Loan terms range from 1-5 years or up to 15 years for the purchase of a primary
residence. The loans are secured by the balance in the participant's account and
bear interest at a rate equal to the prime lending rate plus one, at the date of
origination of the loan.
The Company has the right to amend or terminate the Plan at any time. In the
event of Plan termination, the rights of affected participants shall be 100%
vested.
On July 29, 1998, the Board of Directors of the Company approved the details of
an extensive restructuring plan which includes a net reduction of more than
1,500 employees across all business functions, or approximately 15% of the
Company's U.S. workforce.
Administrative expenses of the Plan are paid by the Plan.
The following plans were merged into the Plan during the year ended December 31,
1998: Tedisco, Inc. 401(k) Profit Sharing Plan, Turnquist, Inc. 401(k) Profit
Sharing Plan, and National Sanitary Supply Company Employee Thrift & Profit
Sharing Plan (including accounts of non-union Paul Koss Supply Company Profit
Sharing Plan). In addition, assets under the Chemed Employee Savings and
Investment Plan were transferred into the Plan during the year ended December
31, 1998.
The following plans were merged into the Plan during the year ended December 31,
1997: Conifer Paper Products, Inc. Stock Bonus Plan, Peerless Products Company
401(k) Profit Sharing Plan, Darter, Inc. 401(k) Profit Sharing Plan, Norel
Employees 401(k) Savings Plan, Roberts Maintenance Supply, Inc. Retirement Plan,
Janco United, Inc. 401(k) Profit Sharing Plan, Spiro-Wallach Company, Inc.
401(k) Profit Sharing Plan, Santa Rosa Paper Company Employee Savings &
Retirement Plan, and Sunland Sanitary Supply, Inc. Profit Sharing Plan.
The above mergers resulted in transfers of net assets to the Plan of $53,469,506
and $16,365,244 for the plan years ended December 31, 1998 and 1997,
respectively.
Information about the Plan, including vesting, withdrawal provisions and special
provisions related to the merged plans, is contained in the Summary Plan
Description, which is available from the Plan Administrator.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
3. Income Tax Status
In June 1998, the Plan applied for but has not yet received a determination
letter from the Internal Revenue Service stating that the Plan is qualified
under section 401(a) of the Internal Revenue Code. However, the Plan
Administrator believes that the Plan is qualified and, therefore, the related
trust is exempt from taxation.
4. Investments
Individual investments that represent 5% or more of the fair value of net assets
available for benefits are as follows:
<TABLE>
<CAPTION>
Shares or
Identity of Investments Par Value Cost Market Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
December 31, 1998:
IKON Office Solutions, Inc.
Common Stock 3,506,942 $ 142,664,081 $ 30,028,188
Unisource Worldwide, Inc.
Common Stock 6,727,205 96,027,129 48,772,236
Vanguard Institutional Index Fund 721,398 62,173,899 81,410,178
PBHG Growth Fund 862,006 22,664,315 22,008,119
Vanguard Stable Value Short Term
Investment Fund 47,718,490 47,718,490 47,718,490
Deutsche Bank Guaranteed
Investment Contract 15,162,069 15,162,069 15,162,069
December 31, 1997:
IKON Office Solutions, Inc.
Common Stock 4,265,218 176,347,568 119,959,252
Unisource Worldwide, Inc.
Common Stock 3,679,091 69,350,510 52,427,043
Vanguard Institutional Index Fund 538,661 39,841,416 48,242,466
PBHG Growth Fund 790,882 20,549,713 20,080,496
</TABLE>
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
4. Investments (continued)
Information about the net assets available for benefits by separate investment
programs at December 31, 1998 follows:
<TABLE>
<CAPTION>
American
IKON Unisource Stable Vanguard PBHG Funds'
Common Common Value Institutional Balanced Growth EuroPacific
Stock Stock Fund Index Fund Fund Fund Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Assets
Investments:
Cash and cash equivalents $ 602,277 $ 1,395,987 $41,944,352 $ - $ 5,774,138 $ - $ -
IKON Office Solutions, Inc.
common stock 29,942,263 - - - - - -
Unisource Worldwide, Inc.
common stock - 48,735,863 - - - - -
Investment funds - - 29,344,627 70,853,267 14,596,559 22,008,119 12,364,433
Participant loans - - - - - - -
Transfer receivable from merged
plans - - - - - - -
Investment income receivable - - - 730,158 104,328 - -
Contributions and other
receivables - - - - - - -
-------------------------------------------------------------------------------------------------
Total assets 30,544,540 50,131,850 71,288,979 71,583,425 20,475,025 22,008,119 12,364,433
Liabilities
Cash overdraft - - - - - - -
Pending security transactions - - - 756,343 111,970 - -
Accrued administrative expenses - - - - - - -
-------------------------------------------------------------------------------------------------
Net assets available for benefits $30,544,540 $50,131,850 $71,288,979 $70,827,082 $20,363,055 $22,008,119 $12,364,433
=================================================================================================
<CAPTION>
Vanguard PIMCO BlackRock Other Assets
Windsor Mid-Cap Small-Cap Participant and
Fund Growth Fund Value Fund Loan Fund Liabilities Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998
Assets
Investments:
Cash and cash equivalents $ 278 $ - $ - $ 2,640 $ - $ 49,719,672
IKON Office Solutions, Inc.
common stock - - - - 85,925 30,028,188
Unisource Worldwide, Inc.
common stock - - - - 36,373 48,772,236
Investment funds 5,543,901 1,861,262 1,054,585 - - 157,626,753
Participant loans - - - 9,585,393 - 9,585,393
Transfer receivable from merged
plans - - - - 69,467 69,467
Investment income receivable - - 10,216 - 16 844,718
Contributions and other
receivables - - - - 135,558 135,558
-------------------------------------------------------------------------------------------------
Total assets 5,544,179 1,861,262 1,064,801 9,588,033 327,339 296,781,985
Liabilities
Cash overdraft - - - - 486,637 486,637
Pending security transactions - - 10,694 - - 879,007
Accrued administrative expenses - - - - 1,046,535 1,046,535
-------------------------------------------------------------------------------------------------
Net assets available for benefits $ 5,544,179 $ 1,861,262 $ 1,054,107 $ 9,588,033 $(1,205,833) $294,369,806
=================================================================================================
</TABLE>
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
4. Investments (continued)
Information about the net assets available for benefits by separate investment
programs at December 31, 1997 follows:
<TABLE>
<CAPTION>
IKON Unisource Vanguard
Common Common Stable Value Institutional Balanced
Stock Stock Fund Index Fund Fund
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Assets
Investments:
Cash and cash equivalents $ 2,613,858 $ 2,239,321 $12,005,109 $ - $ 1,602,111
IKON Office Solutions, Inc.
common stock 119,670,831 - - - -
Unisource Worldwide, Inc.
common stock - 52,354,681 - - -
Investment funds - - 31,624,695 41,689,592 10,749,834
Participant loans - - - - -
Transfer receivable from
merged plans - - - - -
Investment income receivable 12,939 7,420 67,034 554,915 89,357
Contributions and other
receivables - - - - -
---------------------------------------------------------------------------------------
Total assets 122,297,628 54,601,422 43,696,838 42,244,507 12,441,302
Liabilities
Accrued administrative expenses - - - - -
---------------------------------------------------------------------------------------
Net assets available for benefits $122,297,628 $54,601,422 $43,696,838 $42,244,507 $12,441,302
=======================================================================================
<CAPTION>
American
PBHG Funds/1/
Growth EuroPacific Participant
Fund Growth Fund Loan Fund Other Assets Total
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
Assets
Investments:
Cash and cash equivalents $ - $ - $ - $ 664,722 $ 19,125,121
IKON Office Solutions, Inc.
common stock - - - 288,421 119,959,252
Unisource Worldwide, Inc.
common stock - - - 72,362 52,427,043
Investment funds 20,080,496 11,065,762 - - 115,210,379
Participant loans - - 10,612,827 - 10,612,827
Transfer receivable from
merged plans - - - 2,250,768 2,250,768
Investment income receivable - - - 2,355 734,020
Contributions and other
receivables - - - 573,937 573,937
---------------------------------------------------------------------------------------
Total assets 20,080,496 11,065,762 10,612,827 3,852,565 320,893,347
Liabilities
Accrued administrative expenses - - - 160,252 160,252
---------------------------------------------------------------------------------------
Net assets available for benefits $ 20,080,496 $11,065,762 $10,612,827 $ 3,692,313 $320,733,095
=======================================================================================
</TABLE>
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
4. Investments (continued)
The changes in net assets available for benefits by separate investment programs
for the year ended December 31, 1998 follows:
<TABLE>
<CAPTION>
American
IKON Unisource Vanguard PBHG Funds'
Common Common Stable Value Institutional Balanced Growth EuroPacific
Stock Stock Fund Index Fund Fund Fund Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net assets available for
benefits at December 31, 1997 $122,297,628 $ 54,601,422 $ 43,696,838 $42,244,507 $12,441,302 $20,080,496 $11,065,762
Employee contributions - 9,869,250 1,987,067 5,342,503 1,697,374 3,370,442 1,440,339
Employer contributions - 12,022,396 80,298 226,065 96,005 87,709 52,659
Investment income 684,655 3,014,370 3,827,934 1,003,943 664,908 - 166,985
Assets transferred or
receivable from merged plans 62,008 88,283 52,183,746 310,079 570,920 179,115 53,544
Benefit payments (6,008,311) (4,357,491) (11,542,842) (5,753,064) (1,577,714) (2,180,759) (1,107,905)
Administrative expenses - - - - - - -
Realized and unrealized gain
(loss) on investments (74,670,474) (32,088,256) - 12,834,184 1,987,350 (777,042) 1,403,053
Interfund transfers (11,820,966) 6,981,876 (18,944,062) 14,618,865 4,482,910 1,248,158 (710,004)
------------------------------------------------------------------------------------------------
Net assets available for
benefits at December 31, 1998 $ 30,544,540 $ 50,131,850 $ 71,288,979 $70,827,082 $20,363,055 $22,008,119 $12,364,433
================================================================================================
<CAPTION>
Vanguard PIMCO BlackRock Other Assets
Windsor Mid-Cap Small-Cap Participant and
Fund Growth Fund Value Fund Loan Fund Liabilities Total
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets available for
benefits at December 31, 1997 $ - $ - $ - $ 10,612,827 $ 3,692,313 $320,733,095
Employee contributions 277,104 106,041 2,851 - - 24,092,971
Employer contributions 15,737 4,629 66,799 - - 12,652,297
Investment income 73,724 82,520 64,975 907,115 207,847 10,698,976
Assets transferred or
receivable from merged plans 5,964 7,896 7,951 - - 53,469,506
Benefit payments (86,999) (31,810) (8,671) (967,648) - (33,623,214)
Administrative expenses - - - - (2,133,260) (2,133,260)
Realized and unrealized gain
(loss) on investments 106,177 (19,212) (65,738) - (230,607) (91,520,565)
Interfund transfers 5,152,472 1,711,198 985,940 (964,261) (2,742,126) -
------------------------------------------------------------------------------------------------
Net assets available for
benefits at December 31, 1998 $ 5,544,179 $ 1,861,262 $1,054,107 $ 9,588,033 $ (1,205,833) $294,369,806
================================================================================================
</TABLE>
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
4. Investments (continued)
The changes in net assets available for benefits by separate investment programs
for the year ended December 31, 1997 follows:
<TABLE>
<CAPTION>
IKON Unisource Vanguard
Common Common Stable Value Institutional Balanced
Stock Stock Fund Index Fund Fund
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets transferred from IKON
Retirement Savings Plan $205,866,086 $ 49,795,701 $ 40,026,607 $ 23,224,595 $ 7,763,161
Employee contributions - 12,586,944 3,917,389 2,508,365 963,599
Employer contributions - 11,194,371 44,932 80,194 51,066
Investment income 864,940 2,490,508 2,803,747 889,109 445,908
Assets transferred or
receivable from merged
plans 1,538,370 827,461 10,819,130 388,658 48,396
Benefit payments (8,188,776) (4,165,658) (12,687,877) (1,796,790) (679,024)
Administrative expenses - - - - -
Realized and unrealized gain
(loss) on investments (61,557,392) (17,528,648) - 8,619,615 1,433,886
Interfund transfers (16,225,600) (599,257) (1,227,090) 8,330,761 2,414,310
----------------------------------------------------------------------------------------------------
Net assets available for benefits at
December 31, 1997 $122,297,628 $ 54,601,422 $ 43,696,838 $ 42,244,507 $ 12,441,302
====================================================================================================
<CAPTION>
American
PBHG Funds,
Growth EuroPacific Participant Other
Fund Growth Fund Loan Fund Assets Total
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net assets transferred from IKON
Retirement Savings Plan $ 18,340,456 $ 7,589,586 $ 8,832,588 $ - $361,438,780
Employee contributions 2,572,779 1,148,361 - - 23,697,437
Employer contributions 41,223 36,169 - - 11,447,955
Investment income - 171,885 871,255 68,535 8,605,887
Assets transferred or
receivable from merged
plans 449,979 18,782 51,374 2,223,094 16,365,244
Benefit payments (1,385,382) (1,140,616) (256,258) - (30,300,381)
Administrative expenses - - - (1,045,997) (1,045,997)
Realized and unrealized gain
(loss) on investments (925,394) 646,990 - (164,887) (69,475,830)
Interfund transfers 986,835 2,594,605 1,113,868 2,611,568 -
----------------------------------------------------------------------------------------------------
Net assets available for benefits at
December 31, 1997 $ 20,080,496 $ 11,065,762 $ 10,612,827 $ 3,692,313 $320,733,095
====================================================================================================
</TABLE>
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
5. Transactions with Parties-in-Interest
At December 31, 1998 and 1997, the Plan held 2,001,182 and 5,517,901 units,
respectively, of Northern Trust Company's Collective Short-Term Investment Fund.
Northern Trust Company is the Trustee for the Plan.
6. Differences Between Financial Statements and Form 5500
The following is a reconciliation of net assets available for benefits per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
December 31
1998 1997
---------------------------
<S> <C> <C>
Net assets available for benefits per the
financial statements $294,369,806 $320,733,095
Amounts allocated to withdrawn participants (201,868) (942,560)
---------------------------
Net assets available for benefits per the
Form 5500 $294,167,938 $319,790,535
===========================
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997
---------------------------
<S> <C> <C>
Benefits paid to participants per the
financial statements $33,623,214 $ 30,300,381
Add: amounts allocated to withdrawn
participants at year end 201,868 942,560
Less: amounts allocated to withdrawn
participants at beginning of the year (942,560) -
---------------------------
Benefits paid to participants per the
Form 5500 $32,882,522 $ 31,242,941
===========================
</TABLE>
Amounts allocated to withdrawn participants are recorded on the Form 5500 for
benefit claims that have been processed and approved for payment prior to year
end but not yet paid.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Notes to Financial Statements (continued)
7. Year 2000 Readiness (Unaudited)
The Plan Administrator has determined that it will be necessary to take certain
steps in order to ensure that the Plan's information systems are prepared to
handle year 2000 dates. The Plan's information systems are covered by the
Company's four-phase year 2000 initiative which consists of preparing an
inventory of equipment and systems, remediation of equipment and systems, and
implementation and testing of the remediated systems and equipment. The Company
anticipates completing all phases of this project by September 30, 1999. Costs
associated with modifying software and equipment affecting the Plan will be paid
by the Company. The Company has established formal communications with its
third-party service providers to determine that they have developed plans to
address their own year 2000 problems as they relate to the Plan's operations.
All third-party service providers have indicated that they will be year 2000
compliant by September 30, 1999. If modification of data processing systems of
either the Plan, the Company, or its service providers is not completed timely,
the year 2000 problem could have a material impact on the operations of the
Plan. The Company has developed contingency plans for possible year 2000 issues
and is in the process of expanding those plans to address additional issues that
may result from year 2000 noncompliance
8. Subsequent Events
The Company and Georgia-Pacific Corp. (GP) announced on May 25, 1999 that each
of their boards of directors has approved a definitive merger agreement under
which GP will acquire all outstanding shares of the Company for $12 per share in
cash. After the merger, the Company will conduct business under its existing
name as a separate distribution subsidiary of Georgia-Pacific Group, the pulp,
paper and building products business of GP. The effect of the merger with GP on
the Plan, its administration, and net assets available for benefits cannot
presently be determined.
Effective June 17, 1999 the Plan was amended to provide that employer matching
contributions will no longer be made in Unisource common stock. Participants
will be permitted to direct the investment of the matching contribution to any
of the current fund options other than the Unisource and IKON common stock
funds. Absent a specific investment election by participants, employer matching
contributions will be invested in the Stable Value Fund. The last trading price
on June 24, 1999 of the IKON Office Solutions, Inc. Common Stock Fund was $15.00
per share.
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Line 27a - Schedule of Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
Description of Investment,
Identity of Issue, Borrower, Including Maturity Date, Rate of
Lessor, or Similar Party Interest, Par or Maturity Value Cost Current Value
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Collective Short-Term Investment Short-term fixed income
Fund of the Northern Trust investments - 2,001,182 units
Company* $ 2,001,182 $ 2,001,182
Vanguard Stable Value Short Short-term fixed income
Term Investment Fund investments - 47,718,490 units 47,718,490 47,718,490
----------------------------
49,719,672 49,719,672
IKON Office Solutions, Inc. Common stock - 3,506,942 shares 142,664,081 30,028,188
Unisource Worldwide, Inc.* Common stock - 6,727,205 shares 96,027,129 48,772,236
Vanguard Institutional Index Equity investments - 721,398 units
Fund 62,173,899 81,410,178
PBHG Growth Fund Equity investments - 862,006 units 22,664,315 22,008,119
American Funds' EuroPacific Equity investments - 435,367 units
Growth Fund 12,516,293 12,364,433
Vanguard Windsor Fund, Inc. Equity investments - 185,726 units 5,825,276 5,543,901
PIMCO Funds Multi Manager Equity investments - 80,855 units
Series 1,845,467 1,861,262
BlackRock Funds BlackRock Funds Small Cap -
65,502 units 1,040,763 1,054,585
Deutsche Bank Guaranteed investment contracts -
15,162,069 units 15,162,069 15,162,069
United Bank of Switzerland Guaranteed investment contracts -
5,939,305 units 5,939,305 5,939,305
Principal Mutual Guaranteed investment contracts -
3,905,321 units 3,905,321 3,905,321
Bayerische Landesbank Guaranteed investment contracts -
5,297,640 units 5,297,640 5,297,640
Caisse des Depots et Guaranteed investment contracts -
Consignations 3,079,940 units 3,079,940 3,079,940
Participant loans Participant loans, at various
interest rates ranging between
6% and 11.5% - 9,585,393
----------------------------
$427,861,170 $295,732,242
============================
</TABLE>
*Party-in-interest
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Line 27d - Schedule of Reportable Transactions
Year ended December 31, 1998
<TABLE>
<CAPTION>
Selling Price
Purchase or Maturity Net Gain
Identity of Party Involved Description of Assets Price Value Cost or (Loss)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Category III-A series of transactions in a security issue aggregating 5% of plan assets
- ---------------------------------------------------------------------------------------
IKON Office Solutions, Inc. Common stock - purchased 94,104
shares and sold 852,380 shares
in multiple transactions $ 1,577,268 $ 16,934,100 $ 35,260,755 $(18,326,655)
Unisource Worldwide, Inc.* Common stock - purchased 3,357,007
shares and sold 308,893 shares in
multiple transactions 31,890,157 3,422,700 5,213,538 (1,790,838)
Vanguard Institutional Index Fund Equity investments - purchased
355,258 shares and sold 172,52
shares in multiple transactions 35,778,011 16,979,965 13,445,528 3,534,437
American Euro-Pacific Growth Fund Equity investments - purchased
668,932 shares and sold 658,915
shares in multiple transactions 18,845,303 18,376,796 18,129,659 247,137
Collective Short-Term Investment Short-term fixed income investments
Fund of The Northern Trust - purchased 318,838,666 units and
Company* sold 323,234,392 units 318,838,666 323,234,392 323,234,392 -
</TABLE>
Pursuant to Department of Labor Regulation Section 2520.103-6, there were no
Category I, II, or IV reportable transactions during the year ended December 31,
1998.
*Party-in-interest
<PAGE>
Unisource Worldwide, Inc.
Retirement Savings Plan
Exhibit Index
Exhibit Number Description
23 Consent of Independent Auditors
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-72951) pertaining to the Unisource Worldwide, Inc. Retirement
Savings Plan and in the related Prospectus of our report dated June 24, 1999,
with respect to the financial statements and schedules of the Unisource
Worldwide, Inc. Retirement Savings Plan included in this Annual Report (Form 11-
K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
_____________________
Philadelphia, Pennsylvania
June 24, 1999
