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 1-5964
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
IKON OFFICE SOLUTIONS, INC. RETIREMENT SAVINGS PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
IKON OFFICE SOLUTIONS, INC., P.O. BOX 834, VALLEY FORGE, PA 19482-0834.
----------------------------
REQUIRED INFORMATION
a. Financial Statements.
The following financial statements are furnished for the Plan.
1. Audited Statements of Net Assets Available for Benefits - December 31,
1998 and 1997.
2. Audited Statements of Changes in Net Assets Available for Benefits for
the years ended December 31, 1998 and 1997.
3. Notes to Financial Statements
4. Supplemental Schedules
(a) Assets Held for Investment Purposes
(b) Reportable Transactions
b. Exhibits
Exhibit 23 Consent of Independent Auditors
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Financial Statements
and Supplemental Schedules
Years ended December 31, 1998 and 1997
Contents
Report of Independent Auditors...............................................1
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
Assets Held for Investment Purposes.........................................15
Reportable Transactions.....................................................16
<PAGE>
Report of Independent Auditors
Retirement Plans Committee
IKON Office Solutions, Inc.
We have audited the accompanying statements of net assets available for benefits
of the IKON Office Solutions, 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 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 purpose 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. These supplemental schedules are the responsibility of the
Plan's management. 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
June 3, 1999
1
<PAGE>
IKON Office Solutions, 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 $ 6,574,844 $ 7,245,288
IKON Office Solutions, Inc. common stock 104,592,120 219,457,013
Unisource Worldwide, Inc. common stock 12,471,812 32,728,816
Investment funds 152,756,403 131,255,930
Participant loans 14,315,229 16,634,250
--------------------------------
290,710,408 407,321,297
Transfers receivable from merged plans -- 1,239,156
Investment income receivable 810,091 711,517
--------------------------------
291,520,502 409,271,970
Liabilities
Accrued administrative expenses 596,577 817,966
Other 272,630 --
--------------------------------
Net assets available for benefits $290,651,292 $408,454,004
================================
</TABLE>
See accompanying notes.
2
<PAGE>
IKON Office Solutions, 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:
Employee contributions $ 57,825,193 $ 46,451,328
Employer contributions 28,456,006 23,243,261
Assets transferred or receivable from
merged plans 6,525,585 32,579,543
Dividend income 4,748,611 4,315,323
Interest income 4,446,791 4,529,701
-----------------------------------
Total additions 102,002,186 111,119,156
Deductions:
Benefits paid to participants 60,767,514 59,778,762
Administrative expenses 4,297,386 3,381,996
Assets transferred to Unisource Worldwide, Inc.
Retirement Savings Plan -- 361,438,780
-----------------------------------
Total deductions 65,064,900 424,599,538
-----------------------------------
36,937,286 (313,480,382)
Realized and unrealized loss on
investments (154,739,998) (99,301,363)
-----------------------------------
Net decrease for the year (117,802,712) (412,781,745)
Net assets available for benefits at
beginning of year 408,454,004 821,235,749
-----------------------------------
Net assets available for benefits at end of year $ 290,651,292 $ 408,454,004
===================================
</TABLE>
See accompanying notes.
3
<PAGE>
IKON Office Solutions, 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 contributions are withheld from the employees' pay.
The market value of the IKON Office Solutions, Inc. and Unisource Worldwide,
Inc. common stock is determined by use of the last reported sales price on the
last business day of the plan 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, and American Funds' EuroPacific Growth
Fund.
Guaranteed investment contracts held in the Stable Value Fund are valued at fair
value. Investments in the Vanguard Institutional Index Fund, Balanced Fund, PBHG
Growth Fund, and American Funds' EuroPacific Growth 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.
Realized and unrealized gain or loss on investments represents the sum of the
change in the difference between December 31 market value and cost of
investments and the difference between the proceeds received and the cost of
investments sold.
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.
2. Description of Plan
The IKON Office Solutions, Inc. Retirement Savings Plan (formerly the Alco
Standard Corporation Retirement Savings Plan) (the "Plan") is a defined
contribution plan. Participation is limited to full-time and part-time non-union
employees of IKON Office Solutions, Inc. and its domestic subsidiaries which
adopt the Plan.
4
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of Plan (continued)
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.
Sponsoring units of IKON Office Solutions, Inc. (employers) contribute an amount
equal to two-thirds of the first 6% of annual regular salaries or wages that a
participant contributes to the Plan. The employers' 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 employers' contributions upon retirement, position
termination due to permanent shutdown of plant or department, total and
permanent disability, or death. Forfeitures of nonvested accounts are refunded
to the Company to be used to offset employer matching contributions. Forfeitures
were $1,227,400 and $1,533,000 in 1998 and 1997, respectively, and are reflected
in the financial statements as a reduction to employer matching contributions.
The Plan allows participant contributions (and any investment income earned
thereon) to be allocated between investments in IKON Office Solutions, Inc.
common stock or any of the available investment funds. Additional investments in
Unisource Worldwide, Inc. common stock are not permitted. Participants may
change investment allocations at any time. Employer matching contributions are
made in IKON Office Solutions, Inc. common stock and may not be redirected to
any of the other available investment options until the attainment of age 55.
The following is a brief description of the investment funds to 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.
5
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of Plan (continued)
PBHG Growth Fund - Funds are invested primarily in the common stocks of
companies with small to mid 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.
Participants may borrow from their fund accounts a minimum of $1,000 up to a
maximum of $50,000 or 50% of their 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 1% over the prime lending rate.
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.
Administrative expenses of the Plan are paid by the Plan.
The following plans were merged into the Plan on the effective dates indicated.
<TABLE>
<CAPTION>
Effective Date
Plan of Merger
- -----------------------------------------------------------------------------------------------------------
<S> <C>
BCS Integration 401(k) Plan January 1, 1997
Blue-Prints, Inc. 401(k) Profit Sharing Plan January 1, 1997
Cleo's Products & Services, Inc. 401(k) Plan January 1, 1997
The Computer Group, Inc. 401(k) Plan January 1, 1997
Data-Image Systems Corp. 401(k) Profit Sharing Plan January 1, 1997
Executive Automation Consultants, Inc./Network Institute of
America, Inc. Profit Sharing 401(k) Plan January 1, 1997
Global Services, Inc. Employee Savings Plan January 1, 1997
Graphic Management & Services Group, Inc. Profit Sharing Plan January 1, 1997
Integra Technology International, Inc. 401(k) Profit Sharing Plan January 1, 1997
Lasergraphics 401(k) Profit Sharing Plan January 1, 1997
Legal One, Inc. 401(k) Plan January 1, 1997
Mount Auburn Press, Inc. 401(k) Plan January 1, 1997
</TABLE>
6
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of Plan (continued)
<TABLE>
<CAPTION>
Effective Date
Plan of Merger
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Prounis Consulting Group, Inc. 401(k) Plan January 1, 1997
Real World Systems, Inc. 401(k) Plan January 1, 1997
Sunrise Computer Systems, Inc. 401(k) Profit Sharing Plan January 1, 1997
Universal Network, Inc. Savings and Profit Sharing Plan January 1, 1997
The Woodhull Corporation Profit Sharing and Savings Plan January 1, 1997
Zachary Jackson, Inc. Profit Sharing Plan January 1, 1997
Zachary Jackson, Inc. 401(k) Plan January 1, 1997
Hotel Copy Centers of NYC, Inc., (Imagetech) 401(k) Profit
Sharing Plan January 1, 1997
Employees' 401(k) Plan of Winson Olson Co, Inc. February 1, 1997
Southern Copy Products 401(k) Plan February 1, 1997
Larry Smith Office Equipment, Inc. 401(k) Profit Sharing Plan March 1, 1997
City Business Machines, Inc. 401(k) Plan April 1, 1997
HBM Technology Services, Inc. 401(k) Profit Sharing Plan April 1, 1997
Kenwood Associates 401(k) Plan April 1, 1997
Key Business Systems, Inc. Profit Sharing Plan April 1, 1997
IBEC Profit Sharing Plan April 1, 1997
Double D Press, Inc. 401(k) Plan May 1, 1997
The Waldec Group 401(k) Plan June 1, 1997
Riverbend Group, Inc. 401(k) Profit Sharing Plan June 1, 1997
Carlson Group, Inc. 401(k) Plan June 1, 1997
Plain Paper Solutions, Inc. 401(k) Profit Sharing Plan June 1, 1997
Duplicating Products, Inc. 401(k) Savings Plan June 1, 1997
Tech Doc Pub., Inc. 401(k) Retirement Plan June 1, 1997
Legal Copy Specialists, Inc. Profit Sharing Plan June 1, 1997
OA Systems, Inc. Retirement Savings Plan July 1, 1997
Micro Information Services, Inc. 401(k) Plan July 1, 1997
Document Technology, Inc. Retirement Savings Plan July 1, 1997
The Intec Group, Inc. (Mida University) 401(k) Plan August 1, 1997
E. N. Dunlap, Inc. 401(k) Savings Plan August 1, 1997
Integrated Management Systems, Inc. Retirement Plan August 1, 1997
Professional Computing, Inc. 401(k) Plan September 1, 1997
MicroAge of Mesa 401(k) Profit Sharing Plan October 1, 1997
</TABLE>
7
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
2. Description of Plan (continued)
<TABLE>
<CAPTION>
Effective Date
Plan of Merger
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Legal Copy of Hartford Specialists, Inc. Profit Sharing Plan October 1, 1997
Information Marketing, Inc. Profit Sharing Plan December 1, 1997
Professional Computing, Inc. 401(k) Plan February 1, 1998
FotoBeam, Inc. Profit Sharing Plan April 1, 1998
Percomco, Inc. Employees' Profit Sharing Plan April 1, 1998
3-D Communication, Inc. 401(k) Profit Sharing Plan May 1, 1998
Copifax, Inc. 401(k) Plan May 1, 1998
Datafax Systems, Inc. 401(k) Plan June 1, 1998
American Business Systems, Inc. 401(k) Profit Sharing Plan July 1, 1998
The Eagle Copy Service Profit Sharing Plan July 1, 1998
Sierra Office, Inc. Profit Sharing Plan July 1, 1998
Virtual Networks, Inc. 401(k) Profit Sharing Plan July 1, 1998
Financial Systems Products Corp. 401(k) Plan September 1, 1998
Command Services Corp. 401(k) Plan October 1, 1998
Valcom Computer Center 401(k) Savings Plan November 1, 1998
</TABLE>
The above mergers resulted in transfers of net assets to the Plan of $6,525,585
and $32,579,543 during 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.
8
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
3. Unisource Spin-off
On June 19, 1996, Alco Standard Corporation (Alco) announced that it would
separate Unisource, 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. In order to effect the separation of
these businesses, Alco declared a dividend payable to shareholders of record of
Alco common stock at the close of business on December 31, 1996 of one share of
common stock, $.001 par value, of Unisource for every two shares of Alco stock.
The distribution resulted in 100% of the outstanding shares of Unisource common
stock being distributed to Alco shareholders on January 2, 1997. As a result of
this distribution, the Plan received 5,737,490 shares of Unisource stock with a
market value of $115,466,976 on January 2, 1997.
The spin-off was completed on December 31, 1996 and Alco changed its name to
IKON Office Solutions, Inc. on January 23, 1997. The Benefits Agreement entered
into by Alco and Unisource at the time of the spin-off called for Unisource to
establish a new plan identical to the Plan. The net assets, totaling
$361,438,780, of the Plan attributable to the account balances in the Plan of
participants who were actively employed by, or not actively employed but
receiving wages for reasons other than illness or injury from, Unisource
Worldwide, Inc. were transferred to the Unisource Plan on January 2, 1997.
4. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
dated October 24, 1996, stating that the Plan is qualified under Section 401(a)
of the Internal Revenue Code (the "Code") and, therefore, the related trust is
exempt from taxation. Once qualified, the Plan is required to operate in
conformity with the Code to maintain its qualification. The Retirement Plans
Committee believes the Plan is being operated in compliance with the applicable
requirements of the Code and, therefore, believes that the Plan is qualified and
the related trust is tax exempt.
9
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
5. 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 12,215,138 shares $213,025,597 $104,592,120
Vanguard Institutional
Index Fund 570,779 shares 47,765,749 64,412,486
PBHG Growth Fund 972,718 shares 24,376,433 24,843,227
Deutsche Bank
Guaranteed Investment Contract 14,866,601 units 14,866,601 14,866,601
Vanguard Investment
Contract Trust 18,535,919 units 18,535,919 18,535,919
December 31, 1997
IKON Office Solutions, Inc.
Common Stock 7,802,916 shares 224,021,266 219,457,013
Unisource Worldwide, Inc.
Common Stock 2,296,759 shares 47,977,370 32,728,816
Vanguard Institutional
Index Fund 505,603 units 37,023,828 45,281,695
PBHG Growth Fund 957,630 units 24,239,188 24,314,241
</TABLE>
10
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
5. Investments (continued)
Information about the net assets available for benefits by separate investment
programs at December 31, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
Vanguard
IKON Stable Institutional PBHG
Common Value Index Balanced Growth
Stock Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
1998
Assets
Investments:
Cash and cash equivalents $ 2,029,144 $ 127 $ 352 $ 4,972,522 $ 606
IKON Office Solutions, Inc. common stock 104,592,120 -- -- -- --
Unisource Worldwide, Inc. common stock -- -- -- -- --
Investment funds -- 47,765,723 55,293,389 12,617,065 24,843,227
Participant loans -- -- -- -- --
Investment income receivable 13,526 95,822 584,404 114,743 3
--------------------------------------------------------------------------
Total assets 106,634,790 47,861,672 55,878,145 17,704,330 24,843,836
Liabilities
Accrued administrative expenses 97,425 39,138 42,756 14,230 17,719
Other (409,418) -- 584,402 97,646 --
--------------------------------------------------------------------------
Net assets available for benefits $ 106,946,783 $ 47,822,534 $ 55,250,987 $ 17,592,454 $ 24,826,117
==========================================================================
1997
Assets
Investments:
Cash and cash equivalents $ 4,361,969 $ 1 $ 289 $ 658,245 $ 347
IKON Office Solutions, Inc. common stock 219,457,013 -- -- -- --
Unisource Worldwide, Inc. common stock --
Investment funds -- 45,346,526 38,151,406 12,827,397 24,314,241
Participant loans -- -- -- -- --
Transfers receivable from merged plans -- -- -- -- --
Investment income receivable 23,143 69,397 501,545 103,818 --
--------------------------------------------------------------------------
Total assets 223,842,125 45,415,924 38,653,240 13,589,460 24,314,588
Liabilities
Accrued administrative expenses 285,889 51,751 41,916 15,970 27,082
--------------------------------------------------------------------------
Net assets available for benefits $ 223,556,236 $ 45,364,173 $ 38,611,324 $ 13,573,490 $ 24,287,506
==========================================================================
</TABLE>
<TABLE>
<CAPTION>
American
Funds'
EuroPacific Unisource
Growth Common Participant Other
Fund Stock Loans Assets Total
<S> <C> <C> <C> <C> <C>
1998
Assets
Investments:
Cash and cash equivalents $ -- $ 276,281 $ -- $ (704,188) $ 6,574,844
IKON Office Solutions, Inc. common stock -- -- -- -- 104,592,120
Unisource Worldwide, Inc. common stock -- 12,471,812 -- -- 12,471,812
Investment funds 12,236,999 -- -- -- 152,756,403
Participant loans -- -- 14,315,229 -- 14,315,229
Investment income receivable -- 1,593 -- -- 810,091
--------------------------------------------------------------------------
Total assets 12,236,999 12,749,686 14,315,229 (704,188) 291,520,499
Liabilities
Accrued administrative expenses 9,826 11,567 -- 363,916 596,577
Other -- -- -- -- 272,630
--------------------------------------------------------------------------
Net assets available for benefits $ 12,227,173 $ 12,738,119 $ 14,315,229 $ (1,068,104) $ 290,651,292
==========================================================================
1997
Assets
Investments:
Cash and cash equivalents $ -- $ 782,499 $ 1,007 $ 1,440,931 $ 7,245,288
IKON Office Solutions, Inc. common stock -- -- -- 219,457,013
Unisource Worldwide, Inc. common stock 32,728,816 -- -- 32,728,816
Investment funds 10,616,360 -- -- 131,255,930
Participant loans -- -- 16,634,250 -- 16,634,250
Transfers receivable from merged plans -- -- -- 1,239,156 1,239,156
Investment income receivable -- 3,587 -- 10,027 711,517
--------------------------------------------------------------------------
Total assets 10,616,360 33,514,902 16,635,257 2,690,114 409,271,970
Liabilities
Accrued administrative expenses 12,352 44,474 -- 338,532 817,966
--------------------------------------------------------------------------
Net assets available for benefits $ 10,604,008 $ 33,470,428 $ 16,635,257 $ 2,351,582 $ 408,454,004
==========================================================================
</TABLE>
11
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
5. Investments (continued)
The changes in net assets available for benefits by separate investment programs
for the years ended December 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
American
IKON Stable Vanguard PBHG Funds'
Common Value Institutional Balanced Growth EuroPacific
Stock Fund Index Fund Fund Fund Growth Fund
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net assets available for
benefits at $ 603,297,865 $ 79,106,225 $ 41,363,217 $ 16,115,811 $ 37,482,182 $ 13,521,672
January 1, 1997
Employee contributions 29,958,142 2,856,812 4,147,438 1,686,982 5,395,263 2,406,624
Employer contributions 23,292,684 37,832 42,546 27,064 35,738 16,617
Investment income 1,469,804 2,385,320 365,505 73,351 347 841,539
Assets transferred to
Unisource Worldwide,
Inc. Retirement
Savings Plan (255,661,786) (40,026,608) (23,224,595) (7,763,161) (18,340,456) (7,589,586)
Assets transferred or
receivable from
merged plans 2,464,845 25,756,772 1,289,282 915,942 1,242,891 746,319
Benefit payments (26,841,142) (13,990,971) (4,713,730) (3,339,876) (4,010,167) (1,530,520)
Administrative expenses (285,889) (51,751) (41,916) (15,970) (27,082) (12,352)
Realized and unrealized
gain (loss) on
investments (91,489,532) -- 6,717,100 1,845,585 (827,433) (285,948)
Interfund transfers (62,648,755) (10,709,458) 12,666,477 4,027,762 3,336,223 2,489,643
----------------------------------------------------------------------------------------------
Net assets available for
benefits at
December 31, 1997 223,556,236 45,364,173 38,611,324 13,573,490 24,287,506 10,604,008
Employee contributions 27,378,571 6,627,301 9,463,315 3,163,401 7,867,912 3,324,693
Employer contributions 28,030,680 217,785 109,102 55,057 42,398 25,208
Investment income 1,678,412 2,767,522 1,118,573 194,762 262 687,859
Assets transferred or
receivable from
merged plans 1,087,251 10,399,632 1,000,744 374,367 680,981 213,319
Benefit payments (22,502,780) (16,270,716) (8,839,883) (4,056,409) (4,270,215) (1,896,970)
Administrative expenses 188,464 12,613 (840) 1,740 9,363 2,526
Realized and unrealized
gain (loss) on
investments (155,304,330) -- 10,689,028 2,428,180 108,790 893,248
Interfund transfers 2,834,279 (1,295,776) 3,099,624 1,857,866 (3,900,880) (1,626,718)
----------------------------------------------------------------------------------------------
Net assets available for
benefits at
December 31, 1998 $ 106,946,783 $ 47,822,534 $ 55,250,987 $ 17,592,454 $ 24,826,117 $ 12,227,173
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Unisource
Common Participant Other
Stock Loans Assets Total
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Net assets available for
benefits at $ -- $ 24,476,561 $ 5,872,216 $ 821,235,749
January 1, 1997
Employee contributions 67 -- -- 46,451,328
Employer contributions (209,220) -- -- 23,243,261
Investment income 2,071,663 1,386,862 250,633 8,845,024
Assets transferred to
Unisource Worldwide,
Inc. Retirement
Savings Plan -- (8,832,588) -- (361,438,780)
Assets transferred or
receivable from
merged plans 21,210 9,896 132,386 32,579,543
Benefit payments (5,352,356) -- -- (59,778,762)
Administrative expenses (44,474) (2,902,562) (3,381,996)
Realized and unrealized
gain (loss) on
investments (15,261,135) -- -- (99,301,363)
Interfund transfers 52,244,673 (405,474) (1,001,091) --
-------------------------------------------------------------
Net assets available for
benefits at
December 31, 1997 33,470,428 16,635,257 2,351,582 408,454,004
Employee contributions -- -- 57,825,193
Employer contributions (24,224) -- -- 28,456,006
Investment income 1,304,594 1,367,149 76,269 9,195,402
Assets transferred or
receivable from
merged plans 26,543 -- (7,257,252) 6,525,585
Benefit payments (2,930,541) -- -- (60,767,514)
Administrative expenses 32,907 -- (4,544,159) (4,297,386)
Realized and unrealized
gain (loss) on
investments (13,554,914) -- -- (154,739,998)
Interfund transfers (5,586,674) (3,687,177) 8,305,456 --
-------------------------------------------------------------
Net assets available for
benefits at
December 31, 1998 $ 12,738,119 $ 14,315,229 $ (1,068,104) $ 290,651,292
=============================================================
</TABLE>
12
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
6. Transactions with Parties-in-Interest
The Plan purchased from IKON Office Solutions, Inc. 5,911,490 shares (cost
$73,784,723) and 1,855,897 shares (cost $52,174,789) of IKON's common stock at
fair market value on the date of purchase during 1998 and 1997, respectively.
7. 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 $ 290,651,292 $ 408,454,004
Amounts allocated to withdrawn participants (232,325) (154,296)
--------------------------------
Net assets available for benefits per the Form 5500 $ 290,418,967 $ 408,299,708
================================
</TABLE>
The following is a reconciliation of benefits paid to participants per the
financial statements to the Form 5500:
Year ended
December 31,
1998
------------
Benefits paid to participants per the financial statements $ 60,767,514
Add: amounts allocated to withdrawn participants at
December 31, 1998 232,325
Less: amounts allocated to withdrawn participants at
December 31, 1997 (154,296)
------------
Benefits paid to participants per the Form 5500 $ 60,845,543
============
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.
13
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Notes to Financial Statements (continued)
8. Year 2000 (Unaudited)
The Plan Sponsor 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 Sponsor has completed the assessment of its internal
information systems. Both internal and external resources are being utilized to
replace or modify existing software applications, and to test the software and
equipment for year 2000 readiness. The Plan Sponsor anticipates its internal
systems will be year 2000 compliant by October 31, 1999. In addition, the Plan
Administrator has established formal communications with its third-party service
providers to determine whether they have developed plans to address their year
2000 readiness as it relates to the Plan's operations. All third-party service
providers have indicated that they will be year 2000 compliant by the end of
1999. If modifications of data processing systems of either the Plan, the Plan
Sponsor, or its service providers are not completed timely, the year 2000
problem could have a material impact on the operations of the Plan. The Plan
Administrator is currently developing a contingency plan, in the event any
critical system cannot be corrected and certified before December 31, 1999. The
Plan Administrator, as well as the Plan Sponsor, expect to have their
contingency plans in place by October 31, 1999. Costs incurred in completing the
Plan's Year 2000 project with respect to internal systems and the contingency
plan, which are not expected to be material, are being paid by the Plan Sponsor.
9. Subsequent Events
On May 25, 1999, Unisource Worldwide, Inc. agreed to accept Georgia Pacific's
$12 a share in cash buyout offer upon approval of Unisource Worldwide, Inc.'s
shareholders. If this transaction is finalized, all shares held by the Unisource
Stock Fund (1,720,250 shares at December 31, 1998) will be converted to cash and
the Unisource Stock Fund will be closed. The cash received will be allocated to
other investment options based on participants' current contribution elections
or to the Stable Value Fund for those participants not currently making
contributions.
14
<PAGE>
Supplemental Schedules
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Assets Held for Investment Purposes
December 31, 1998
<TABLE>
<CAPTION>
Current
Identity of Issue Description of Investment Cost Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Collective Short-Term Investment Fund Short-term fixed income
of the Northern Trust Company* investments - 6,574,844 units $ 6,574,844 $ 6,574,844
IKON Office Solutions, Inc.* Common Stock - 12,215,138 shares 213,025,597 104,592,120
Unisource Worldwide, Inc. Common Stock - 1,720,250 shares 34,890,902 12,471,812
Vanguard Institutional Index Fund Equity investments - 570,779 units 47,765,749 64,412,489
PBHG Growth Fund Equity investments - 972,718 units 24,376,433 24,843,227
American Funds' EuroPacific
Growth Fund Equity investments - 430,880 units 11,629,124 12,236,999
Deutsche Bank Guaranteed investment contracts -
14,866,601 units 14,866,601 14,866,601
United Bank of Switzerland Guaranteed investment contracts -
5,821,585 units 5,821,585 5,821,585
Vanguard Investment Contract Trust Guaranteed investment contracts -
18,535,919 units 18,535,919 18,535,919
Principal Mutual Guaranteed investment contracts -
3,827,975 units 3,827,975 3,827,975
Bayerische Landesbank Guaranteed investment contracts -
5,192,719 units 5,192,719 5,192,719
Caisse des Depots et Consignations Guaranteed investment contracts -
3,018,889 units 3,018,889 3,018,889
Participant loans Participant loans, at various interest
rates ranging between 6% and 11.5%
- 14,315,229
------------------------------
$ 389,526,337 $ 290,710,408
==============================
<FN>
*Party-in-interest
</FN>
</TABLE>
15
<PAGE>
IKON Office Solutions, Inc. Retirement Savings Plan
Reportable Transactions
Year ended December 31, 1998
<TABLE>
<CAPTION>
Selling Price or Net Gain
Identity of Party Involved Description of Assets Purchase Price Maturity Value Cost or (Loss)
- ------------------------------------------------------------------------------------------------------------------------------------
Category III--A series of transactions in a security issue aggregating 5% of plan assets
<S> <C> <C> <C> <C> <C>
IKON Office Solutions, Inc.* IKON Office Solutions, Inc.
common stock - purchased
5,911,490 shares and sold
1,499,268 shares in
multiple transactions. $ 73,784,723 $ 33,345,285 $ 31,180,687 $2,164,598
Vanguard Institutional Index Fund Vanguard Institutional
Index Fund - purchased
262,325 shares and sold
197,149 shares in
multiple transactions. 26,158,933 19,650,142 15,417,012 4,233,130
Collective Short-Term Investment Short-term fixed income
Fund of The Northern Trust Company* investments purchased
359,540,786 units and
sold 360,211,232 units
in multiple transactions. 359,540,786 360,211,230 360,211,230 --
<FN>
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
</FN>
</TABLE>
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed by the undersigned
thereunto duly authorized.
IKON OFFICE SOLUTIONS, INC.
RETIREMENT SAVINGS PLAN
By: /s/ Nancy J. Heiden Dated: June 28, 1999
Nancy J. Heiden
Plan Administrator
<PAGE>
FORM 11-K
IKON OFFICE SOLUTIONS, INC. RETIREMENT SAVINGS PLAN
FISCAL YEAR ENDED DECEMBER 31, 1998
INDEX TO EXHIBITS
Exhibit Number Description
Exhibit 23 Consent of Independent Auditors
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-47765 pertaining to the IKON Office Solutions, Inc. Retirement
Savings Plan of our report dated June 3, 1999, with respect to the financial
statements and supplemental schedules of the IKON Office Solutions, 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 28, 1999
