United Stationers Inc. Reports First Quarter 2005 Results
DES PLAINES, Ill., May 5 /PRNewswire-FirstCall/ -- United Stationers Inc.
(Nasdaq: USTR) reported net sales for the first quarter ended March 31, 2005
of $1.1 billion, compared with sales of $1.0 billion for the first quarter of
2004. Net income for the first quarter of 2005 was $27.0 million, compared
with $23.4 million in the same period last year. Diluted earnings per share
for the first quarter of 2005 were $0.80, up 17.6% compared with $0.68 in the
prior-year quarter.
First Quarter Results
Sales for the first quarter of 2005 rose $73.1 million, or 7.4%, versus
the same quarter last year. Sales grew in all product categories, with
continued strong performance in janitorial and sanitation supplies and office
furniture. In addition, cut-sheet paper and technology-related hardware were
strong contributors to the growth in the quarter. The overall growth rate in
the quarter slowed during the last two weeks of March due to the timing of
vacations linked to spring break, which occurred in the second quarter of last
year.
Gross margin as a percent of sales for the first quarter declined slightly
to 14.8%, compared with 14.9% for the prior-year quarter. During the first
quarter of 2005, gross margin was unfavorably affected by competitive sell-
side pricing pressures, particularly within the technology category. The
decline was partially offset by the positive impact of buy-side price
inflation in certain other product categories (which improved gross margin as
the company sold through inventory purchased in advance of supplier price
increases) and lower freight costs resulting from the company's War on Waste
(WOW) initiatives.
Operating expenses for the first quarter of 2005 were $111.7 million, or
10.5% of sales, compared with $108.2 million, or 10.9% of sales, in the same
period last year. Operating expenses in 2005 included additional costs for
consulting expense to help accelerate the company's efforts in global sourcing
and legal/forensic accounting costs incurred early in the quarter related to
the company's review and investigation of its Canadian division. These cost
increases were offset by lower distribution payroll costs and the partial
reversal of a reserve related to retirement benefits for certain former
officers. The operating margin for the latest three months was 4.3%, compared
with 4.0% in the same quarter last year.
Cash Flow and Debt Reduction
The company's net cash provided by operating activities totaled
$4.4 million for the first quarter of 2005, versus $4.1 million in the first
quarter of 2004. Adjusting to exclude the effects of receivables sold under
the company's securitization program, net cash provided by operating
activities for the most recent quarter totaled $53.4 million, compared with
$54.1 million in the first quarter of 2004. On this adjusted basis, the 2005
results were impacted by higher earnings and a smaller reduction in working
capital compared with 2004. Net capital spending in the first quarter of 2005
was $7.3 million, which included significant expenditures related to our
information technology systems and infrastructure. A reconciliation of these
items to the most comparable GAAP measures is presented at the end of this
release.
Outstanding debt totaled $18.6 million at March 31, 2005, down
$1.2 million from March 31, 2004. Outstanding debt plus securitization
financing totaled $88.1 million at the quarter's end, a decline of
approximately $31.7 million during the past 12 months. Earnings and proceeds
from the exercise of stock options - partially offset by net capital spending,
working capital requirements and share repurchases - contributed to lower debt
levels. Adjusted debt-to-total capitalization (including the securitization
financing) was 10.4% at March 31, 2005, compared with 14.7% at this time last
year. A reconciliation of these items to the most comparable GAAP measures is
presented at the end of this release.
Outlook
"Our first quarter sales growth reflects the success of our sales
initiatives, as well as a stronger overall economy and the benefits of product
price inflation," explained Richard W. Gochnauer, president and chief
executive officer. "Our sales momentum remains strong through the first part
of the second quarter. This sales growth allows us to benefit from leveraging
our fixed costs across a higher sales base. In addition, we are aggressively
implementing our WOW initiatives which are helping to lower our overall cost
structure. At the same time, we are continuing to invest in people,
technology, infrastructure and marketing programs.
"We believe our investments in sales and cost-savings initiatives should
help improve our operating margin in the future. In addition, we continue to
evaluate acquisition opportunities that are focused on increasing long-term
profitability by extending our customer base and expanding our product
offerings. Our long-term financial goals include revenue increases that match
or exceed the industry's, and annual EPS growth of 12% to 15% -- although the
results in any given quarter may exceed or fall short of these goals based on
changes in the economy or company-specific events," Gochnauer concluded.
Conference Call
United Stationers will hold a conference call followed by a question and
answer session on Friday, May 6, at 10:00 a.m. CT, to discuss first quarter
results. To participate, callers within the U.S. and Canada should dial (800)
599-9829 and international callers should dial (617) 847-8703 approximately 10
minutes before the presentation. The passcode is "43613627." To listen to
the Webcast via the Internet, participants should visit the Investor
Information section of the company's Web site at
http://www.unitedstationers.com several minutes before the event is broadcast
and follow the instructions provided to ensure that the necessary audio
application is downloaded and installed. This program is provided at no
charge to the user. In addition, interested parties can access an archived
version of the call, also located on the Investor Information section of
United Stationers' Web site, about two hours after the call ends and for at
least the following two weeks. This news release, along with other
information relating to the call, will be available on the Investor
Information section of the Web site.
Forward-Looking Statements
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 ability to effectively manage its operations and to implement general
cost-reduction and margin-enhancement initiatives; United's ability to
successfully procure and implement new information technology (IT) packages
and systems, integrating them with and/or migrating from existing IT systems
and platforms without business disruption or other unanticipated difficulties
or costs; United's ability to effectively integrate past and future
acquisitions into its management, operations, financial and technology
systems; United's timely and efficient implementation of improved internal
controls in response to conditions previously or subsequently identified at
its Canadian division or elsewhere, in order to maintain an effective internal
control environment in compliance with the Sarbanes-Oxley Act of 2002; the
conduct and scope of the SEC's informal inquiry relating to United's Canadian
division or any formal investigation that may arise from this, and the
ultimate resolution of any inquiry or investigation; the outcome of, and any
costs associated with the defense of legal proceedings pending against the
company; United's reliance on key suppliers and the impact of variability in
their pricing, allowance programs and other terms, conditions and policies,
such as those relating to geographic or product sourcing limitations, price
protection terms and return rights; variability in supplier allowances and
promotional incentives payable to the company, based on inventory purchase
volumes, attainment of supplier-established growth hurdles, and supplier
participation in the company's annual and quarterly catalogs and other
marketing programs, and the impact of these supplier allowances and
promotional incentives on the company's gross margins; United's reliance on
key customers, and the business, credit and other risks inherent in continuing
or increased customer concentration; continuing or increasing competitive
activity and pricing pressures within existing or expanded product categories;
increases in customers' purchases directly from product manufacturers;
United's ability to anticipate and respond to changes in end-user demand and
to effectively manage levels of any excess or obsolete inventory; the impact
of variability in customer demand on United's product offerings and sales mix
and, in turn, on customer rebates payable, and supplier allowances earned, by
the company and on United's gross margin; reliance on key management
personnel, both in day-to-day operations and in execution of new business
initiatives; uncertainties related to any new regulations applicable to the
company, including any new rulemaking by the SEC; acts of terrorism or war;
and prevailing economic conditions and changes affecting the business products
industry and the general economy.
Company Overview
United Stationers Inc., with 2004 sales of $4.0 billion, is North
America's largest broad line wholesale distributor of business products. Its
integrated computer-based distribution systems make more than 40,000 items
available to approximately 15,000 reseller customers. United is able to ship
products within 24 hours of order placement because of its 35 United
Stationers Supply Co. distribution centers, 24 Lagasse distribution centers
that serve the janitorial and sanitation industry, two Azerty distribution
centers in Mexico that serve computer supply resellers, and two distribution
centers that serve the Canadian marketplace. Its focus on fulfillment
excellence has given the company an average order fill rate of better than
97%, a 99.5% order accuracy rate, and a 99% on-time delivery rate. For more
information, visit http://www.unitedstationers.com .
The company's common stock trades on The NASDAQ Stock Market(R) under the
symbol USTR.
United Stationers Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
For the Three Months Ended
March 31,
2005 2004
Net sales $1,060,943 $987,866
Cost of goods sold 903,958 840,283
Gross profit 156,985 147,583
Operating expenses:
Warehousing, marketing and administrative
expenses 111,710 108,245
Income from operations 45,275 39,338
Interest expense, net 719 629
Other expense, net 1,087 465
Income before income taxes 43,469 38,244
Income tax expense 16,477 14,865
Net income $26,992 $23,379
Net income per common share - diluted:
Net income per common share - diluted $0.80 $0.68
Weighted average number of common shares
outstanding - diluted 33,807 34,461
United Stationers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
As of March 31, As of
2005 2004 Dec. 31, 2004
ASSETS
Current assets:
Cash and cash equivalents $17,947 $16,723 $15,719
Accounts receivable, net 129,368 154,568 178,644
Retained interest in receivables
sold, net* 308,585 229,059 227,807
Inventories 578,949 495,689 608,549
Other current assets 20,571 25,708 18,623
Total current assets 1,055,420 921,747 1,049,342
Property, plant and equipment,
net 150,963 153,328 151,848
Goodwill, net 184,161 182,327 184,222
Other 24,617 25,454 21,828
Total assets $1,415,161 $1,282,856 $1,407,240
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $397,208 $349,674 $402,794
Accrued liabilities 146,057 125,238 140,558
Deferred credits 29,699 28,342 47,518
Total current liabilities 572,964 503,254 590,870
Deferred income taxes 20,963 21,465 20,311
Long-term debt 18,600 19,800 18,000
Other long-term liabilities 42,949 44,755 46,856
Total liabilities 655,476 589,274 676,037
Stockholders' equity:
Common stock, $0.10 par value;
authorized - 100,000,000 shares,
issued - 37,217,814 shares in
2005 and 2004 3,722 3,722 3,722
Additional paid-in capital 337,537 330,142 337,192
Treasury stock, at cost -
4,030,113 shares and 3,369,659
shares at March 31, 2005 and
2004, respectively and
4,076,432 shares at
December 31, 2004 (118,595) (85,515) (119,435)
Retained earnings 547,600 454,016 520,608
Accumulated other
comprehensive loss (10,579) (8,783) (10,884)
Total stockholders' equity 759,685 693,582 731,203
Total liabilities and
stockholders' equity $1,415,161 $1,282,856 $1,407,240
*The March 31, 2005 and 2004 and December 31, 2004 accounts receivable
balances do not include $69.5 million, $100.0 million and $118.5 million,
respectively, of accounts receivable sold through a securitization
program.
United Stationers Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the Three Months Ended
March 31,
2005 2004
Cash Flows From Operating Activities:
Net income $26,992 $23,379
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,059 6,973
Amortization of capitalized financing costs 159 180
Gain on the disposition of plant, property
and equipment (2) (528)
Write down of assets held for sale -- 300
Changes in operating assets and liabilities:
Decrease in accounts receivable, net 49,328 40,760
Increase in retained interest in receivables
sold, net (80,778) (75,337)
Decrease in inventory 29,740 44,074
Increase in other assets (5,706) (636)
Decrease in accounts payable (5,525) (8,268)
Increase (decrease) in accrued liabilities 4,167 (10,240)
Decrease in deferred credits (17,819) (16,525)
Increase (decrease) in deferred taxes 652 (159)
(Decrease) increase in other liabilities (3,906) 104
Net cash provided by operating activities 4,361 4,077
Cash Flows From Investing Activities:
Capital expenditures (4,028) (2,358)
Proceeds from the disposition of property,
plant and equipment -- 4,702
Net cash (used in) provided by investing
activities (4,028) 2,344
Cash Flows From Financing Activities:
Net borrowings under revolver 600 2,500
Issuance of treasury stock 1,531 595
Acquisition of treasury stock, at cost -- (2,926)
Payment of employee withholding tax related
to stock option exercises (266) (86)
Net cash provided by financing activities 1,865 83
Effect of exchange rate changes on cash and
cash equivalents 30 (88)
Net change in cash and cash equivalents 2,228 6,416
Cash and cash equivalents, beginning of period 15,719 10,307
Cash and cash equivalents, end of period $17,947 $16,723
United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Debt to Total Capitalization
(dollars in thousands)
March 31,
2005 2004 Change
Long-term debt $18,600 $19,800 $(1,200)
Accounts receivable sold 69,500 100,000 (30,500)
Total debt and securitization
(adjusted debt) 88,100 119,800 (31,700)
Stockholders' equity 759,685 693,582 66,103
Total capitalization $847,785 $813,382 $34,403
Adjusted debt to total
capitalization 10.4% 14.7% (4.3%)
Note: Adjusted debt to total capitalization is provided as an additional
liquidity measure. Generally Accepted Accounting Principles require that
accounts receivable sold under the Company's receivables securitization
program be reflected as a reduction in accounts receivable and not
reported as debt. Internally, the Company considers accounts receivables
sold to be a financing mechanism. The Company believes it is helpful to
provide readers of its financial statements with a measure that adds
accounts receivable sold to debt, and calculates debt to total
capitalization on that basis.
Net Capital Spending
(in thousands)
For the Three Months Ended Forecast
March 31, Year Ending
2005 2004 Dec. 31, 2005
Capital expenditures $4,028 $2,358 N/A
Proceeds from the disposition
of property, plant and equipment -- (4,702) N/A
Net cash used in (provided by)
investing activities 4,028 (2,344) N/A
Capitalized software 3,238 686 N/A
Net capital spending $7,266 $ 1,658 $ 30,000
Note: Net capital spending is provided as an additional measure of
investing activities. The Company's accounting policy is to include
capitalized software in "Other Assets." Generally Accepted Accounting
Principles require that "Other Assets" be included on the cash flow
statements under the caption "Net Cash Provided by Operating Activities."
Internally, the Company measures cash used in investing activities
including capitalized software. The Company believes that it is helpful
to provide readers of its financial statements with this same
information.
United Stationers Inc.
Reconciliation of Non-GAAP Financial Measures - continued
Adjusted Cash Flow
(in thousands)
For the Three Months Ended
March 31,
2005 2004
Cash Flows From Operating Activities:
Net cash provided by operating activities $4,361 $4,077
Excluding the change in accounts receivable sold 49,000 50,000
Net cash provided by operating activities
excluding the effects of receivables sold $53,361 $54,077
Cash Flows From Financing Activities:
Net cash provided by financing activities $1,865 $83
Including the change in accounts receivable
sold (49,000) (50,000)
Net cash used in financing activities including
the effects of receivables sold $(47,135) $(49,917)
Note: Adjusted cash provided by operating activities is presented as an
additional liquidity measure. Generally Accepted Accounting Principles
require that the cash flow effects of changes in the amount of accounts
receivable sold under the Company's receivables securitization program be
reflected within operating cash flows. Internally, the Company considers
accounts receivable sold to be a financing mechanism and not a source of
cash flow related to operations. The Company believes it is helpful to
provide readers of its financial statements with operating cash flows
adjusted for the effects of changes in accounts receivable sold.
SOURCE United Stationers Inc.
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