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2014

United Stationers Fourth Quarter EPS Rises 4.9 Percent to $0.85; Adjusted EPS was $0.86, Up 6.2 Percent

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DEERFIELD, Ill., Feb. 13, 2014 /PRNewswire/ -- For the quarter ended December 31, 2013, United Stationers (NASDAQ:   USTR) today announced that net income was $34.1 million, or $0.85 per share, compared with $32.9 million, or $0.81 per share, in 2012.  The results include a non-deductible asset impairment charge of $1.2 million, or $0.03 per share, related to the company's investment in a managed print services business; and a benefit of $1.3 million, or $0.02 per share, from a partial reversal of the workforce reduction and facility closure charge taken in the first quarter of 2013.  Adjusted fourth quarter earnings per share were $0.86(1).

Financial Highlights

  • Fourth quarter earnings per share were $0.85, up 4.9 percent; on an adjusted basis, fourth quarter earnings per share were $0.86(1), up 6.2 percent
  • Fourth quarter operating income was $57.6 million, or 4.7 percent of sales
  • Fourth quarter operating expenses were 11.3 percent of sales versus 11.8 percent in 2012
  • Full year reported earnings per share rose 12.1 percent to $3.06; on an adjusted basis, full year earnings per share were $3.29(1), up 16.7 percent

Fourth Quarter Performance

Sales decreased 1.6 percent to $1.22 billion from $1.24 billion, as growth in janitorial/breakroom and industrial products was offset by a decline in office products categories.  Industrial supply sales increased 10.8 percent to $124.3 million from $112.3 million, largely driven by the O.K.I. Supply acquisition.  Sales in janitorial/breakroom supplies rose 7.1 percent to $332.8 million from $310.7 million.  Technology sales declined 11.1 percent to $346.4 million from $389.4 million.  Traditional office products sales declined 2.6 percent to $310.9 million from $319.3 million in 2012.  Furniture sales decreased 4.5 percent to $72.9 million from $76.4 million in the prior year.

"I'm pleased with our overall performance in the quarter and for the full year.  We made significant progress executing our diversification strategy, expanded our margins, and managed our costs in a weak demand environment.  We continued to make strategic investments in our business, such as the O.K.I. acquisition and e-business capabilities.  Our strategy is working and we are positioned well in the market place with both manufacturers and resellers as we enter 2014," said Cody Phipps, United Stationers' president and chief executive officer. 

Fourth quarter gross profit was $195.5 million, down from $201.7 million in 2012.  The decline resulted from higher freight costs and an increase in inventory-related costs, primarily LIFO charges.  This was partially offset by improved product margin, including inventory purchase-related supplier allowances.  Gross margin was 16.0 percent compared with a record 16.2 percent in the prior year. 

Operating expenses were $137.9 million, or 11.3 percent of sales, versus $146.3 million, or 11.8 percent of sales, in the fourth quarter of 2012.  The improvement reflected the expected benefit of the restructuring charge taken in the first quarter, as well as lower variable management compensation, lower workers' compensation insurance expenses, and lower healthcare costs. 

Operating income was $57.6 million, or 4.7 percent of sales, compared with $55.4 million, or 4.4 percent of sales, a year ago.

Interest expense was $2.9 million compared with $4.3 million in 2012.  The decrease primarily was due to the expiration of an interest rate swap in January 2013.

Income tax expense was $20.5 million versus $18.1 million in 2012, reflecting the asset impairment charge which was non-deductible.  Without the charge, the quarterly effective tax rate would have been approximately 37 percent. 

Full Year Performance

Net income was $123.2 million, or $3.06 per share, compared with $111.8 million, or $2.73 per share, in 2012.  Adjusted for the impact of the workforce reduction and facility closure charges in 2013 and 2012, as well as the asset impairment charge in 2013, net income was $132.4(1) million, or $3.29(1) per share, compared with $115.7(1), or $2.82(1) per share, in 2012.

Sales were even with prior year at $5.08 billion.  Industrial supply sales increased 26.5 percent to $517.8 from $409.3 million.  Sales in janitorial/breakroom supplies rose 4.1 percent to $1.34 billion from $1.28 billion.  Technology sales declined 6.2 percent to $1.47 billion from $1.56 billion.  Sales in traditional office products sales declined 4.1 percent to $1.31 billion from $1.37 billion.  Furniture products sales decreased 3.8 percent to $312.3 million from $324.7 million

Gross profit was $789.6 million versus $774.6 million last year.  Gross margin was 15.5 percent compared with 15.2 percent in 2012. 

Operating expenses were $580.4 million, or 11.4 percent of sales, compared with $573.7 million, or 11.3 percent of sales, in 2012.  Excluding the aforementioned charges, operating expenses were $566.3(1) million, or 11.1 percent of sales, compared with $567.4(1) million, or 11.2 percent of sales, in 2012. 

Operating income was $209.1 million, or 4.1 percent of sales, compared with $200.9 million, or 4.0 percent of sales, last year.  Excluding the charges discussed earlier, operating income was $223.3(1) million, or 4.4 percent of sales, compared with $207.2(1) million, or 4.1 percent of sales, in 2012. 

Cash Flow and Debt

Net cash provided by operating activities in 2013 was $74.7 million, compared with $189.8 million in 2012.  The year-over-year decline in operating cash flow was attributable primarily to higher inventory levels related to year-end opportunistic purchases, as well as the timing of accounts payable.  Net capital expenditures in 2013 were $30.3 million compared with $32.0 million in 2012. 

The company has total committed funding sources of approximately $1.0 billion.  As of December 31, 2013, the company had total debt outstanding of $533.7 million, compared with $524.4 million as of December 31, 2012.  As of December 31, 2013 and 2012, debt-to-total capitalization was 39.3 percent and 41.5 percent, respectively.  In 2013, the company repurchased 1.7 million shares for $62.1 million and paid $22.3 million in dividends to shareholders.

Outlook           

"We remain committed to our long-term strategy of strengthening and extending our core businesses while diversifying into higher growth and higher margin channels and categories.  In 2013, we successfully integrated our acquisition of O.K.I., executed our restructuring, and refinanced our credit facilities at favorable interest rates.  Our balance sheet remains strong which will enable us to continue to pursue our growth initiatives, build important new capabilities, make strategic acquisitions, and return capital to shareholders.  We expect the challenging office products environment to continue, yet opportunities for growth are available to us.   We will continue to invest to strengthen and reposition our business for profitable growth," Phipps concluded. 

Conference Call

United Stationers ("United Stationers" or "United") will hold a conference call followed by a question and answer session on Friday, February 14, 2014, at 10:00 a.m. CST, to discuss fourth quarter and full year 2013 results.  To participate, callers within the U.S. should call 866-270-1533, callers in Canada should dial (855) 669-9657, and international callers should dial (412) 317-0797 approximately 10 minutes before the presentation.   The passcode is "10038981."  To listen to the webcast, participants should visit the Investors section of the company's website (link: http://investors.unitedstationers.com), and click on the "Q4-13 Earnings Release" button on the right side of the page, several minutes before the event is broadcast.  Interested parties can access an archived version of the call, this earnings release, a financial slide presentation, and other information related to the call, also located on the Investors section of United Stationers' website, approximately two hours after the call ends. 

Forward-Looking Statement

This news release contains forward-looking statements, including references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature.  These statements are based on management's current expectations, forecasts and assumptions.  This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here.  These risks and uncertainties include, but are not limited to the following: United's reliance on key customers, and the risks inherent in continuing or increased customer concentration; end-user demand for products in the office , technology, and furniture product categories may continue to decline; prevailing economic conditions and changes affecting the business products industry and the general economy; United's ability to effectively manage its operations and to implement growth, cost-reduction and margin-enhancement initiatives; United's reliance on supplier allowances and promotional incentives; United's reliance on independent resellers for a significant percentage of its net sales and, therefore, the importance of the continued independence, viability and success of these resellers; continuing or increasing competitive activity and pricing pressures within existing or expanded product categories, including competition from product manufacturers who sell directly to United's customers; the impact of supply chain disruptions or changes in key suppliers' distribution strategies; United's ability to maintain its existing information technology systems and the systems and e-commerce services that it provides to customers, and to successfully procure, develop and implement new systems and services without business disruption or other unanticipated difficulties or costs; the creditworthiness of United's customers; United's ability to manage inventory in order to maximize sales and supplier allowances while minimizing excess and obsolete inventory; United's success in effectively identifying, consummating and integrating acquisitions; the risks and expense associated with United's obligations to maintain the security of private information provided by United's customers; the costs and risks related to compliance with laws, regulations and industry standards affecting United's business; the availability of financing sources to meet United's business needs; United's reliance on key management personnel, both in day-to-day operations and in execution of new business initiatives; and the effects of hurricanes, acts of terrorism and other natural or man-made disruptions. 

Shareholders, potential investors and other readers are urged to consider these risks and uncertainties in evaluating forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. For additional information about risks and uncertainties that could materially affect United's results, please see the company's Securities and Exchange Commission filings.  The forward-looking information in this news release is made as of this date only, and the company does not undertake to update any forward-looking statement.  Investors are advised to consult any further disclosure by United regarding the matters discussed in this release in its filings with the Securities and Exchange Commission and in other written statements it makes from time to time.  It is not possible to anticipate or foresee all risks and uncertainties, and investors should not consider any list of risks and uncertainties to be exhaustive or complete.

Company Overview

United Stationers Inc. is a leading wholesale distributor of business products, with 2013 net sales of $5.1 billion.  The company stocks a broad assortment of approximately 140,000 items on a national basis, including technology products, traditional office products, janitorial and breakroom supplies, office furniture, and industrial supplies.  A network of 64 distribution centers allows it to deliver these products to over 25,000 reseller customers.  This network, combined with United's depth and breadth of inventory, enables the company to ship most products overnight to more than 90 percent of the U.S. and offer next-day delivery to major cities in Mexico and Canada.  For more information, visit unitedstationers.com. 

United Stationers' common stock trades on the NASDAQ Global Select Market under the symbol USTR.

Note:  All EPS numbers in this document are diluted unless stated otherwise.

(1)

This is non-GAAP information.  A reconciliation of these items to the most comparable GAAP measures is presented at the end of this news release.  Except as noted, all references within this news release to financial results are presented in accordance with U.S. Generally Accepted Accounting Principles.

 

For Further Information Contact:
Cody Phipps
President and Chief Executive Officer
or
Todd Shelton
Senior Vice President and Chief Financial Officer
847-627-7000

 


United Stationers Inc. and Subsidiaries

Condensed Consolidated Statements of Income

(in thousands, except per share data)



For the Three Months Ended


For the Years Ended


December 31,


December 31,


2013


2012


2013


2012













Net sales

$

1,223,638


$

1,244,074


$

5,085,293


$

5,080,106

Cost of goods sold


1,028,182



1,042,416



4,295,715



4,305,502

Gross profit


195,456



201,658



789,578



774,604













Operating expenses:












   Warehousing, marketing and

             administrative expenses


137,870



146,304



580,428



573,693













Operating income


57,586



55,354



209,150



200,911













Interest expense, net


2,937



4,332



11,640



23,276













Income before income taxes


54,649



51,022



197,510



177,635













Income tax expense


20,524



18,097



74,340



65,805













Net income

$

34,125


$

32,925


$

123,170


$

111,830













Net income per share – diluted

$

0.85


$

0.81


$

3.06


$

2.73

Weighted average number of
   common shares − diluted


39,915



40,406



40,236



40,991













 

United Stationers Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(dollars in thousands, except share data)




As of December 31,


2013


2012

ASSETS






  Current assets:






    Cash and cash equivalents

$

22,326


$

30,919

    Accounts receivable, net


643,379



658,760

    Inventories


830,295



767,206

    Other current assets


29,255



30,118

           Total current assets


1,525,255



1,487,003







  Property, plant and equipment, net


143,050



143,523

  Goodwill


356,811



357,226

  Intangible assets, net


65,502



67,192

  Other long-term assets


25,576



20,260

           Total assets

$

2,116,194


$

2,075,204







LIABILITIES AND STOCKHOLDERS' EQUITY






  Current liabilities:






    Accounts payable

$

476,113


$

495,278

    Accrued liabilities


191,531



205,228

    Short-term debt


373



--

           Total current liabilities


668,017



700,506







  Deferred income taxes


29,552



18,054

  Long-term debt


533,324



524,376

  Other long-term liabilities


59,787



94,176

           Total liabilities


1,290,680



1,337,112







  Stockholders' equity:






    Common stock, $0.10 par value; authorized − 100,000,000
       shares, issued – 74,435,628 shares in 2013 and 2012


7,444



7,444

    Additional paid-in capital


411,954



404,196

    Treasury stock, at cost – 34,714,083 and 34,116,220
       shares at December 31, 2013 and 2012,  respectively


(998,234)



(963,220)

    Retained earnings


1,444,238



1,343,437

    Accumulated other comprehensive loss


(39,888)



(53,765)

  Total stockholders' equity


825,514



738,092

       Total liabilities and stockholders' equity

$

2,116,194


$

2,075,204







 

 


United Stationers Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)



For the Years Ended December 31,


2013


2012

Cash Flows From Operating Activities:






     Net income

$

123,170


$

111,830

     Adjustments to reconcile net income to net cash provided by






         operating activities:






     Depreciation and amortization


39,138



36,077

     Share-based compensation


10,808



8,746

     (Gain) loss on the disposition of plant, property and equipment


(57)



122

     Amortization of capitalized financing costs


1,021



995

     Excess tax benefits related to share-based compensation


(3,977)



(648)

     Asset impairment charge


1,183



--

     Deferred income taxes


(3,921)



(6,713)

  Changes in operating assets and liabilities:






         Decrease in accounts receivable, net


14,735



21,820

         (Increase) decrease in inventory


(66,627)



10,374

         (Increase) decrease in other assets


(4,224)



21,105

         (Decrease) increase in accounts payable


(40,634)



16,264

         Increase (decrease) in checks in-transit


21,348



(32,008)

         (Decrease) increase in accrued liabilities


(3,648)



276

         (Decrease) increase in other liabilities


(13,578)



1,574

             Net cash provided by operating activities


74,737



189,814

Cash Flows From Investing Activities:






     Capital expenditures


(33,789)



(32,787)

  Proceeds from the disposition of property, plant and equipment


3,516



775

  Acquisition net of cash acquired


--



(75,254)

             Net cash used in investing activities


(30,273)



(107,266)

Cash Flows From Financing Activities:






     Net repayments under revolving credit facility


(31,378)



(123,633)

     Borrowings under receivables securitization program


40,700



150,000

     Net proceeds from share-based compensation arrangements


19,895



864

     Acquisition of treasury stock, at cost


(62,056)



(69,908)

Payment of cash dividends


(22,309)



(21,285)

     Excess tax benefits related to share-based compensation


3,977



648

     Payment of debt issuance costs


(1,889)



(143)

             Net cash used in financing activities


(53,060)



(63,457)

     Effect of exchange rate changes on cash and cash equivalents


3



45

     Net change in cash and cash equivalents


(8,593)



19,136

     Cash and cash equivalents, beginning of period


30,919



11,783

     Cash and cash equivalents, end of period

$

22,326


$

30,919

 

 



United Stationers Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income, Net Income, and Diluted Earnings Per Share

(unaudited)

(in thousands, except per share data)




For the Three Months Ended December 31,



2013


2012



Amount


% to
Net Sales


Amount


% to
Net Sales










Net sales


$

1,223,638


100.00%


$

1,244,074


100.00%










Gross profit


$

195,456


15.97%


$

201,658


16.20%










Operating expenses


$

137,870


11.27%


$

146,304


11.76%

Workforce reduction and facility closure charge reversal


1,259


0.10%


--


--

Asset impairment charge


(1,183)


(0.10)%


--


--

Adjusted operating expenses


$

137,946


11.27%


$

146,304


11.76%










Operating income


$

57,586


4.70%


$

55,354


4.44%

Operating expense items noted above


(76)


(0.00)%


--


--

Adjusted operating income


$

57,510


4.70%


$

55,354


4.44%










Net income


$

34,125




$

32,925



Operating expense items noted above, net of tax


402




--



Adjusted net income


$

34,527




$

32,925












Diluted earnings per share


$

0.85




$

0.81



Per share operating expense items noted above


0.01




--



Adjusted diluted earnings per share


$

0.86




$

0. 81












Adjusted diluted earnings per share — growth rate over the prior year period


6%
















Weighted average number of common shares — diluted


39,915




40,406



Note: Adjusted Operating Expenses, Operating Income, Net Income and Earnings Per Share in the first quarter of 2013, exclude the effects of a $1.3 million reversal of a portion of the workforce reduction and facility closure charge taken in the first quarter of 2013, and a $1.2 million non-deductible asset impairment charge.  Generally Accepted Accounting Principles require that the effects of these items be included in the Condensed Consolidated Statements of Income.  Management believes that excluding these items is an appropriate comparison of its ongoing operating results to last year. It is helpful to provide readers of its financial statements with a reconciliation of these items to its Condensed Consolidated Statements of Income reported in accordance with Generally Accepted Accounting Principles.

 

United Stationers Inc. and Subsidiaries

Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income, Net Income and Diluted Earnings Per Share

(in thousands, except per share data)




For the Years Ended December 31,



2013


2012



Amount


% to
Net Sales


Amount


% to
Net Sales










Sales


$

5,085,293


100.00%


$

5,080,106


100.00%









Gross profit


$

789,578


15.52%


$

774,604


15.24%










Operating expenses


$

580,428


11.41%


$

573,693


11.28%

Net workforce reduction and facility closure charge



(12,975)


(0.26)%



(6,247)


(0.12)%

    Asset impairment charge



(1,183)


(0.02)%



--


--

Adjusted operating expenses


$

566,270


11.13%


$

567,446


11.16%












Operating income


$

209,150


4.11%


$

200,911


3.96%

Operating expense items noted above


14,158


0.28%


6,247


0.12%

Adjusted operating income


$

223,308


4.39%


$

207,158


4.08%










Net income


$

123,170




$

111,830



Operating expense items noted above, net tax


9,227




3,873



Adjusted net income


$

132,397




$

115,703












Diluted earnings per share


$

3.06




$

2.73



Per share operating expense items noted above


0.23




0.09



Adjusted diluted earnings per share


$

3.29




$

2.82












Adjusted diluted earnings per share – growth rate over the prior year period










17%
















Weighted average number of common shares – diluted


40,236




40,991












 

Note: Adjusted Operating Expenses, Operating Income, Net Income and Diluted Earnings Per Share for the year ended December 31, 2013 exclude the effects of a $13.0 million net charge related to workforce reduction and facility closures, and a $1.2 million non-deductible asset impairment charge. December 31, 2012, excludes the effect of a $6.2 million charge related to workforce reductions and facility closures. Generally Accepted Accounting Principles require that the effects of these items be included in the Condensed Consolidated Statements of Income.  Management believes that excluding these items results in an appropriate comparison of the Company's ongoing operating results. It is helpful to provide readers of the financial statements with a reconciliation of these items to the Condensed Consolidated Statements of Income reported in accordance with Generally Accepted Accounting Principles.

SOURCE United Stationers Inc.



RELATED LINKS
http://www.unitedstationers.com

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