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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) January 26, 1999
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UNISOURCE WORLDWIDE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE File No. 1-14482 13-5369500
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(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
1100 Cassatt Road, Berwyn, Pennsylvania 19312
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (610) 296-4470
---------------------------
Not Applicable
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(FORMER NAME, FORMER ADDRESS, AND FORMER FISCAL YEAR, IF CHANGED SINCE
LAST REPORT)
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Item 5. Other Events.
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On January 26, 1999, the Registrant issued the attached press release.
Item 7. Financial Statements and Exhibits.
---------------------------------
(c) Exhibits.
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(99) Press Release dated January 26, 1999.
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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: January 26, 1999
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Exhibit Index
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(99) Press Release dated January 26, 1999.
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EXHIBIT 99
NEWS RELEASE
Contact
Martha A. Buckley JoAnn P. Huston
Vice President, Corporate Communications Director, Investor Relations
610-722-3511 610-722-3513
UNISOURCE REPORTS FIRST QUARTER RESULTS
BERWYN, PENNSYLVANIA -- JANUARY 26, 1999 -- Unisource Worldwide, Inc.
(NYSE:UWW) reported today underlying earnings per share of $.10 for its first
quarter of fiscal 1999, which ended December 31, 1998. This performance was
within the consensus range expected by securities analysts. Prior year's
comparable results were earnings per share of $.21. Reported earnings were $.07
per share for the first quarter of fiscal 1999 versus a loss of $1.47 for the
prior-year quarter.
Underlying performance for the first fiscal 1999 quarter excludes one-time
costs of $3 million pre-tax, $1.7 million after-tax, ($.03 per share) for
implementation of the company's extensive restructuring program. Underlying
performance for the prior-year quarter excludes a $168 million pre-tax, $109
million after-tax, ($1.60 per share) charge related to the write-off of the
company's SAP-based IT system and a $5.7 million ($.08 per share) tax charge
related to the October 1997 sale of the company's U.S.-based grocery supply
business.
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PAPER PRICING IMPACTS PERFORMANCE
Revenues for the quarter declined 10.1% to $1.68 billion. Underlying
operating income was $23.3 million, a 36.5% decline from underlying performance
in the first quarter of fiscal 1998. Underlying net income was $6.8 million, a
52.7% decrease from the comparable quarter last year. Reported operating income
for the quarter was $20.3 million and reported net income was $5.1 million.
"The decline in revenues was attributable primarily to a 9.1% decline in
paper pricing," commented Ray B. Mundt, chairman and chief executive officer.
"Overall price decreases in both businesses impacted revenues by 6.7%, while a
modest decrease in volume in base operations accounted for approximately 1% of
the revenue decline. The impact of foreign exchange rates, and the fact that
the 1998 quarter last year still contained some grocery revenues, each
contributed about 1% to the revenue decline."
Gross profit for the quarter was $304.4 million, 5.8% lower than the $323.0
million reported in the prior-year quarter. Gross trading margins increased to
18.1%, compared with 17.3% for the first quarter of last year.
"We reduced underlying selling and administrative expense by $5.2 million
or 1.8% for the quarter," Mundt continued. "However, that decline was not
sufficient to offset the reduced gross profit dollars resulting from price
declines."
CASH FLOW
Interest expense for the quarter declined by 5.4%, due to the company's
positive cash flow performance during the latter part of fiscal 1998. As
anticipated, the company used cash for operating activities in the first
quarter. The $17.8 million cash usage included $4.6 million (net of tax) for
the restructuring program. Cash usage for investing activities was minimal, and
after payment of the quarterly dividend, the company repaid $5.8 million of
debt. "We have reduced our debt by $205 million, or 29%, over the last year,"
Mundt said.
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RESTRUCTURING ON TRACK
"We remain on track with our restructuring program," Mundt said. "Through
December 31, we reduced our total number of U.S. locations from 424 to 360 and
our net warehouse space by 1.1 million square feet, achieving approximately one-
third of our goal of a 3 million square foot reduction. Our workforce reduction
is also proceeding as planned, with a reduction to date of approximately 500
positions."
"We've also initiated several programs to increase average order size and
profitability," Mundt said. On October 1, the company instituted a minimum order
size throughout the organization. "Our experience to date is that customers have
been willing to work with us on these programs," Mundt said, "and our sales and
customer service people have done an outstanding job in fostering these changes.
The number of transactions we process has decreased, while average order size
and GTM per order has increased."
In January, the company also instituted a minimum commissionable gross
profit per order threshold. "Both of these initiatives should begin to improve
order profitability, consistent with our restructuring plan," Mundt said.
LAWSUIT FILED AGAINST FORMER EMPLOYEES
The company also announced today that it has filed a lawsuit against four
former employees of its New York-based Websource division, all of whom recently
resigned. The suit alleges that the former employees breached the duty of
loyalty they owed to Unisource by -- while still employed by Unisource --
enticing and attempting to entice Unisource employees, customers and suppliers
to leave Unisource; misusing and misappropriating Unisource's trade secrets and
confidential information; failing to use their full energies and efforts to
promote Unisource's business; and working to establish a newly-formed company as
a competitor to Unisource.
The suit also names as a defendant the new company, which was recently
incorporated to broker paper to the magazine, catalog, direct mail,
documentation and book
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industries on a nationwide basis, putting it in direct competition with
Websource. Three of the four resigned Websource employees are principals of the
newly-formed company.
While the company is taking aggressive steps to protect this important
business, Unisource management estimates that lost business at Websource could
reduce operating income by $5 to $8 million for the fiscal year.
PAPER PRICING CONTINUES TO IMPACT 1999 PERFORMANCE
Commenting on the outlook for the remainder of the year, Mundt said, "Paper
prices remain significantly below where they were a year-ago, and our view is
that the declines may well continue through our second quarter. As a result, our
earnings performance could be $.03 to $.04 below current consensus estimates for
the quarter. Websource could have an additional $.02 negative impact in the
second quarter and, potentially, $.04 to $.06 for the year."
Unisource Worldwide, Inc. (http://www.unisourcelink.com), headquartered in
Berwyn, Pennsylvania, is one of the largest distributors of paper products,
packaging materials and maintenance supplies in North America. Fiscal 1998
revenues were $7.4 billion.
All statements, other than statements of historical fact, made in this press
release, including, without limitation, (i) statements relating to the
restructuring program and the timing thereof (including the Company's plans with
respect to a reduction in its facilities, warehouse space, and workforce and
including improved profitability as a result of the implementation of the
Company's average order size and its minimum commissionable gross profit per
order initiatives), the projected costs and expenses associated with the
restructuring program, and the financial results and benefits to be realized
from such restructuring, (ii) statements relating to future earnings per share
or other future financial performance, (iii) statements relating to anticipated
future pricing levels and the effect thereof upon the Company's earnings, (iv)
statements relating to lost business at Websource, including the effect such
lost business would have upon the Company's future operating income and earnings
per share, and (v) statements qualified by the words "believes," "anticipates,"
"expects," "intends," "may," "estimates," "will," and other words or expressions
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, 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,
delays or difficulties with consolidation of its information technology systems
and the upgrading of such systems to be year 2000 compliant, and the outcome of
the litigation instituted by the Company against certain of its former Websource
employees. 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, 1998, which is on file with
the Securities and Exchange Commission.
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UNISOURCE WORLDWIDE, INC.
FINANCIAL SUMMARY - UNAUDITED
(in thousands, except earnings (loss) per share)
<TABLE>
<CAPTION>
Three Months Ended December 31
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1998 1997 % Change
----------- ----------- ------
<S> <C> <C> <C>
Revenues
Printing and Imaging $ 1,044,734 $ 1,172,665 (10.9)%
Supply Systems 635,797 696,470 (8.7)
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Total Revenues 1,680,531 1,869,135 (10.1)
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Cost of Goods Sold
Cost of goods sold - printing and imaging 895,925 1,018,647 (12.0)
Cost of goods sold - supply systems 480,217 527,486 (9.0)
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Total Cost of Goods Sold 1,376,142 1,546,133 (11.0)
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Gross Profit 304,389 323,002 (5.8)
Selling and Administrative Expense 281,072 286,258 (1.8)
Restructuring implementation costs (1) 2,972 -
Special charge (2) - 168,000
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Income (Loss) from Operations 20,345 (131,256)
Interest 11,464 12,123
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Income (Loss) Before Income Taxes 8,881 (143,379)
Provision (Benefit) for Income Taxes (3) 3,819 (42,766)
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Net Income (Loss) $ 5,062 $ (100,613)
========== ==========
Basic Earnings (Loss) Per Share $ 0.07 $ (1.47)
========== ==========
Diluted Earnings (Loss) Per Share (4) $ 0.07 $ (1.47)
========== ==========
Basic Shares Outstanding 69,933 68,567
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Diluted Shares Outstanding 70,032 68,567
========== ==========
Operations Analysis:
Gross profit %, printing and imaging 14.2% 13.1%
Gross profit %, supply systems 24.5% 24.3%
Total gross profit % 18.1% 17.3%
SG&A as a % of revenues 16.7%** 15.3%*
SG&A as a % of gross profit 92.3%** 88.6%*
Operating income % of revenues 1.4%** 2.0%*
</TABLE>
* Excludes special charge.
** Excludes restructuring implementation costs.
(1) Represents restructuring implementation costs associated with streamlining
the Company's organizational structure ($1.7 million after tax, $0.03 loss
per share).
(2) Represents write-off of capitalized Information Technology development and
related costs associated with NADS ($109 million net of tax, $1.60 loss per
share).
(3) Quarter ended December 31, 1997 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) Diluted shares outstanding for December 1997 exclude the impact of stock
options due to the antidilutive effect on the loss per share.
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THIS SCHEDULE PRESENTS THE UNDERLYING FINANCIAL RESULTS OF UNISOURCE WORLDWIDE,
INC. EXCLUDING SPECIAL AND RESTRUCTURING CHARGES INCURRED IN FISCAL 1999 AND
1998 (SEE TABLE AT BOTTOM OF PAGE).
UNISOURCE WORLDWIDE, INC.
UNDERLYING FINANCIAL SUMMARY - UNAUDITED
(in thousands, except earnings per share)
<TABLE>
<CAPTION>
Three Months Ended December 31
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1998 1997 % Change
----------- ----------- ------
<S> <C> <C> <C>
Revenues
Printing and Imaging $ 1,044,734 $ 1,172,665 (10.9)%
Supply Systems 635,797 696,470 (8.7)
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Total Revenues 1,680,531 1,869,135 (10.1)
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Cost of Goods Sold
Cost of goods sold - printing and imaging 895,925 1,018,647 (12.0)
Cost of goods sold - supply systems 480,217 527,486 (9.0)
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Total Cost of Goods Sold 1,376,142 1,546,133 (11.0)
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Gross Profit 304,389 323,002 (5.8)
Selling and Administrative Expense 281,072 286,258 (1.8)
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Income from Operations 23,317 36,744 (36.5)
Interest 11,464 12,123
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Income Before Income Taxes 11,853 24,621
Provision for Income Taxes 5,097 10,334
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Net Income $ 6,756 $ 14,287 (52.7)
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Basic Earnings Per Share $ 0.10 $ 0.21 (52.4)
========== ==========
Diluted Earnings Per Share $ 0.10 $ 0.21 (52.4)
========== ==========
Basic Shares Outstanding 69,933 68,567
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Diluted Shares Outstanding 70,032 69,066
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Operations Analysis:
Gross profit %, printing and imaging 14.2% 13.1%
Gross profit %, supply systems 24.5% 24.3%
Total gross profit % 18.1% 17.3%
SG&A as a % of revenues 16.7% 15.3%
SG&A as a % of gross profit 92.3% 88.6%
Operating income % of revenues 1.4% 2.0%
</TABLE>
THE TABLE BELOW REFLECTS THE FINANCIAL STATEMENT IMPACT OF THE SPECIAL AND
RESTRUCTURING CHARGES INCURRED. SUCH CHARGES HAVE BEEN EXCLUDED FROM THE
FINANCIAL RESULTS PRESENTED ABOVE.
<TABLE>
<CAPTION>
Pre-Tax After-Tax Loss
Charge Charge Per Share
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<S> <C> <C> <C>
Fiscal 1999:
Implementation costs related to streamlining the Company's organizational
structure:
Relocation, recruiting, training and other $ 2,972 $ 1,743 $ (0.03)
========== ========== ===========
Fiscal 1998:
Write-off of capitalized information Technology development and related costs
associated with NADS $ 168,000 $ 109,200 $ (1.60)
Tax charge associated with the sale of a significant portion of its U.S.-
based Grocery Supply Systems business -- 5,700 (0.08)
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Total $ 168,000 $ 114,900 $ (1.68)
========== ========== ===========
</TABLE>
THIS INFORMATION IS PROVIDED FOR ADDITIONAL ANALYSIS AND IS NOT INTENDED TO BE A
PRESENTATION IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
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UNISOURCE WORLDWIDE, INC.
CONSOLIDATED BALANCE SHEETS - UNAUDITED
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE PER SHARE)
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, SEPTEMBER 30,
- ----- 1998 1998
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CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 22,319 $ 49,960
Accounts receivable, less allowance for doubtful accounts:
12/31/98 - $24,672; 9/30/98 - $22,713 560,504 640,443
Inventories 371,064 353,270
Prepaid expenses and deferred taxes 84,368 87,746
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Total current assets 1,038,255 1,131,419
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LONG-TERM RECEIVABLES 3,612 5,723
PROPERTY AND EQUIPMENT, AT COST 431,001 428,884
Less accumulated depreciation 209,620 201,599
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221,381 227,285
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GOODWILL 576,532 580,932
DEFERRED COSTS AND OTHER ASSETS 22,052 21,292
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$1,861,832 $1,966,651
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES
Current portion of long-term debt $ 1,133 $ 1,155
Notes payable 6,052 3,651
Trade accounts payable 374,850 451,123
Accrued salaries, wages and commissions 27,741 40,520
Restructuring costs 58,032 61,588
Other accrued expenses 103,202 107,356
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Total current liabilities 571,010 665,393
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LONG-TERM DEBT 497,018 505,199
DEFERRED TAXES AND OTHER LIABILITIES
Deferred taxes 12,815 11,770
Restructuring costs 28,528 30,414
Other long-term liabilities 52,553 55,517
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Total deferred taxes and other liabilities 93,896 97,701
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STOCKHOLDERS' EQUITY
Preferred stock, 12/31/98 and 9/30/98 - par value $.001,
authorized - 10,000,000 shares, no shares issued and
outstanding --- ---
Common stock, par value $.001, authorized - 250,000,000
shares, issued; 12/31/98 - 70,179,530
and 9/30/98 - 70,245,536 shares 70 70
Additional paid in capital 831,945 832,268
Unearned compensation (2,219) (2,727)
Retained deficit (85,982) (87,533)
Foreign currency translation adjustments (43,881) (43,711)
Cost of common shares in treasury; 12/31/98 - 3,052
shares; 9/30/98- 1,205 shares (25) (9)
--------------------- --------------------
699,908 698,358
--------------------- --------------------
$1,861,832 $1,966,651
===================== ====================
</TABLE>
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UNISOURCE WORLDWIDE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended December 31 (in thousands)
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1998 1997
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<S> <C> <C>
Operating Activities
Net income (loss) $ 5,062 $(100,613)
Additions (deductions) to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 8,464 8,610
Amortization 5,140 5,515
Provision for losses on accounts receivable 2,482 2,859
Special charges, net of deferred taxes -- 122,500
Payments for restructuring and special charges (5,039) (1,718)
Changes in operating assets and liabilities, net
of effects from acquisitions and divestitures:
Sale of accounts receivable -- 150,000
Other changes in accounts receivable 77,457 51,723
Increase in inventories (17,794) (54,367)
(Increase) decrease in prepaid expenses 521 (3,369)
Decrease in accounts payable and
accrued expenses (92,810) (59,392)
Miscellaneous (1,333) (5,328)
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Net cash provided by operating activities (17,850) 116,420
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Investing Activities
Proceeds from the sale of property and equipment 73 592
Proceeds from divestitures -- 48,126
Cost of companies acquired, net of cash acquired (100) (35,098)
Expenditures for property and equipment (2,731) (8,554)
Collection of notes receivable 2,111 --
Deferred cost expenditures -- (11,163)
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Net cash used in investing activities (647) (6,097)
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Financing Activities
Debt repayments -- (116,254)
Proceeds from (repayment of) borrowings under
credit facilities, net (5,802) 16,773
Payment of dividends (3,511) (13,805)
Other 169 (180)
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Net cash provided by (used in) financing activities (9,144) (113,466)
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Net decrease in cash (27,641) (3,143)
Cash and cash equivalents at beginning of year 49,960 45,384
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Cash and cash equivalents at end of year $ 22,319 $ 42,241
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</TABLE>
