2014

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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