United Stationers Inc. Reports Record Sales and Earnings for 2005
DES PLAINES, Ill., Feb. 16 /PRNewswire-FirstCall/ -- United Stationers
Inc. (Nasdaq: USTR) reported net sales for the year ended December 31, 2005,
of $4.4 billion, up 10.5% from $4.0 billion in the prior year. Net income for
2005 was $97.5 million, an increase of 8.4% from $90.0 million in 2004.
Diluted earnings per share for 2005 were $2.90, up 9.4% versus $2.65 in 2004.
Important Progress Made During 2005
"2005 was another year of solid growth, significant financial and
operational achievements, and strong cash flow for United Stationers," said
Richard W. Gochnauer, president and chief executive officer. "For the third
consecutive year, our associates exceeded the $20 million annual savings goal
for our War on Waste (WOW), which resulted from productivity improvements and
continued cost reductions. WOW helped to offset our pricing margin pressure
as well as other cost increases. The integration of the Sweet Paper
acquisition with Lagasse is progressing well and is accelerating our market
development initiatives, allowing us to get closer to our goal of providing
national distribution for foodservice consumables. We also made investments
to significantly strengthen our global sourcing capabilities and to expand our
private-brand product lines, which offer higher margins for both our reseller
customers and United.
"Our Project Vision technology initiatives also are taking United -- and
its resellers -- to the next level of competitiveness. One example is
United's November introduction of the SAP Hosted Solution for Business
Products Resellers. Independent dealers have reacted very positively to this
program for integrating their back-office and marketing capabilities. We
believe these and other actions set the stage for continued improvements in
the coming years," added Gochnauer.
2005 Record Results
Net sales for the year ended December 31, 2005, were up $417 million, or
10.5%, compared with the prior year. This increase reflects continued strong
growth in the furniture and janitorial/sanitation supplies categories. The
acquisition of Sweet Paper, which closed on May 31, 2005, added approximately
4% to the overall sales growth. Gross margin as a percent of sales for 2005
was 14.6%, representing a slight improvement over the prior year. Operating
expenses in 2005 totaled $479 million, or 10.8% of sales, compared with
$433 million, or 10.8% of sales, in 2004. Operating income was $166 million,
or 3.8% of sales, compared with $149 million, or 3.7% in 2004.
Record results for 2005 were achieved while incurring $3.5 million in
costs resulting from Hurricane Katrina, expensing $6.6 million for Project
Vision, and settling a preference avoidance lawsuit for approximately
$2.0 million. In addition, the company's Canadian operation posted a
$5.8 million operating loss in 2005. Operating results for 2004 were
negatively affected by approximately $12.3 million related to the company's
Canadian operation.
Cash Flow, Debt Trends and Share Repurchases
Net cash provided by operating activities for the years ended
December 31, 2005 and 2004, totaled $218 million and $47 million,
respectively. Net cash provided by operating activities, excluding the
effects of receivables sold, totaled $112 million in 2005, compared with
$79 million in 2004. A reconciliation of these items to the most comparable
Generally Accepted Accounting Principles (GAAP) measures is presented at the
end of this news release.
Total debt and securitization financing increased during 2005 by
approximately $110 million, to $246 million. This increase reflected funding
for the acquisition of Sweet Paper, share repurchases, and capital spending,
including investments in Project Vision. Debt levels were held down by
continued strong cash flow resulting from solid earnings, improved working
capital efficiency and proceeds from the exercise of employee stock options.
Debt-to-total capitalization (adjusted to include the securitization
financing) was 24.2% at December 31, 2005, compared with 15.6% in the prior
year. These numbers are reconciled to the most comparable GAAP measures at
the end of this release.
Share repurchases in 2005 totaled $85 million or 1.8 million shares. As
of December 31, 2005, $76.5 million remained under the share repurchase
authorization from the company's board of directors.
Fourth-Quarter Results
Net sales for the 2005 fourth quarter were $1.1 billion, compared with
sales of $1.0 billion in 2004, an increase of 9.4%. The acquisition of Sweet
Paper contributed approximately 6% of the sales growth. Gross margin for the
quarter was 15.4% versus 13.8% a year ago. Gross margin was positively
affected by higher supplier allowances as the company reached year-end
purchase-volume hurdles.
Operating expenses for the latest three months were $130 million, or 11.8%
of sales, compared with $110 million, or 10.9% of sales, in the same period
last year. The increase in operating expenses included Project Vision, Sweet
Paper and an adjustment to the accrual for management bonuses. The operating
margin for the latest three months was 3.6%, compared with 2.9% in the same
quarter of 2004. Results for the fourth quarter of 2005 and 2004 were
adversely affected by losses incurred in the company's Canadian operation.
Net income in the fourth quarter was $24 million, versus $19 million in the
comparable 2004 quarter. Diluted earnings per share for the fourth quarter of
2005 were $0.72, compared with $0.57 in the prior-year quarter.
Favorable 2006 Outlook
"We are looking forward to achieving strong financial performance in 2006.
Sales to date are up approximately 10% over the same period last year.
Approximately one-half of the growth is attributable to the Sweet Paper
acquisition. Our long-term goals continue to be to achieve sales growth in
the range of 6% to 9% and annual earnings per share increases of 12% to 15%
over the prior year," stated Gochnauer.
"We would like to note three specific items that will affect our results
this year. First, we expect stock option expensing will reduce earnings per
share by approximately $0.16 to $0.18 in 2006. This is roughly the same
magnitude as we will report in our 2005 10-K footnote. Second, a proposed
change in our product content syndication program may change the timing of the
recognition of related revenues and costs resulting in a significant one-time
positive impact on earnings during 2006. However, until we finalize our
programs, we cannot quantify the earnings impact. Finally, as we previously
announced, 2006 will be a year of substantial investment in IT systems and
infrastructure, so we expect net capital spending will be approximately
$48 million. We have adjusted the pace of our projects and as a result
anticipate 2006 expenses related to Project Vision to be in the range of
$9 million to $12 million," he added.
"We believe that our continued focus on margin initiatives, combined with
the success of our WOW program, will enable us to continue to improve our
operating performance this year. We look forward to delivering great service
to our customers, continuing our growth and creating more value for our
shareholders," Gochnauer concluded.
Conference Call
United Stationers will hold a conference call followed by a question and
answer session on Friday, February 17, at 10:00 a.m. CT, to discuss 2005
results. To participate, callers within the U.S. and Canada should dial
(866) 202-4367 and international callers should dial (617) 213-8845
approximately 10 minutes before the presentation. The passcode is "51947685."
To listen to the webcast, 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 they have the necessary audio application 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 packages and
systems without business disruption or other unanticipated difficulties or
costs; United's ability to effectively integrate past and future acquisitions;
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 or threatened against the company;
United's reliance on key suppliers and the impact of variability in their
pricing, allowance programs, promotional incentives and other terms,
conditions and policies; 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; the impact of
variability in customer and end-user 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 inventory levels and gross margin;
United's reliance on key management personnel, both in day-to-day operations
and in execution of new business initiatives; changes in laws and regulations
applicable to the company; the effects of hurricanes and other natural
disasters, acts of terrorism or war; and prevailing economic conditions and
changes affecting the business products industry and the general economy.
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 such 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.
We do not undertake to update any forward-looking statement, and investors
are advised to consult any further disclosure by us on this matter in our
filings with the Securities and Exchange Commission and in other written
statements we make 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 an exhaustive or complete list.
Company Overview
United Stationers Inc. is North America's largest broad line wholesale
distributor of business products, with annual sales of $4.4 billion. The
company's network of 68 distribution centers allows it to offer nearly 50,000
items to its approximately 20,000 reseller customers. This network, combined
with United's depth and breadth of inventory in technology products,
traditional business products, office furniture, janitorial and sanitation
products, and foodservice consumables, enables the company to ship products on
an overnight basis to more than 90% of the U.S. and major cities in Canada and
Mexico. United's focus on fulfillment excellence has given it 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 For the Years Ended
December 31, December 31,
2005 2004 2005 2004
Net sales $1,102,843 $1,007,813 $4,408,546 $3,991,190
Cost of goods sold 932,324 868,719 3,763,230 3,408,974
Gross profit 170,519 139,094 645,316 582,216
Operating expenses:
Warehousing,
marketing and
administrative
expenses 131,242 109,611 480,737 433,027
Restructuring and
other charges
(reversal) (765) - - (1,331) - -
Total operating
expenses 130,477 109,611 479,406 433,027
Income from operations 40,042 29,483 165,910 149,189
Interest expense, net 945 950 2,786 2,901
Other expense, net 2,418 1,093 7,035 3,488
Income before income
taxes 36,679 27,440 156,089 142,800
Income tax expense 13,164 8,192 58,588 52,829
Net income $23,515 $19,248 $ 97,501 $89,971
Net income per common
share -diluted $0.72 $0.57 $2.90 $2.65
Weighted average number
of common shares -
diluted 32,825 33,808 33,612 33,985
United Stationers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
December 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $17,415 $15,719
Accounts receivable, net 237,176 184,512
Retained interest in receivables sold, net* 116,538 227,807
Inventories 669,787 608,549
Other current assets 29,030 18,623
Total current assets 1,069,946 1,055,210
Property, plant and equipment, net 158,601 151,848
Intangible assets, net 29,879 1,901
Goodwill, net 242,173 184,222
Other 41,602 19,927
Total assets $1,542,201 $1,413,108
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $447,142 $402,794
Accrued liabilities 165,982 140,558
Deferred credits 51,738 47,518
Total current liabilities 664,862 590,870
Deferred income taxes 29,609 20,311
Long-term debt 21,000 18,000
Other long-term liabilities 58,218 46,856
Total liabilities 773,689 676,037
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
Additional paid-in capital 344,628 337,192
Treasury stock, at cost - 5,288,691 shares
in 2005 and 4,076,432 shares in 2004 (194,334) (119,435)
Retained earnings 618,109 520,608
Accumulated other comprehensive loss (3,613) (5,016)
Total stockholders' equity 768,512 737,071
Total liabilities and stockholders'
equity $1,542,201 $1,413,108
*The December 31, 2005 and 2004 accounts receivable balances do not include
$225.0 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 Years Ended
December 31,
2005 2004
Cash Flows From Operating Activities:
Net income $97,501 $89,971
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 32,079 27,164
Amortization of capitalized financing costs 670 648
Loss on the disposition of plant, property
and equipment 264 114
Write down of assets held for sale - - 300
Deferred income taxes (1,425) (181)
Changes in operating assets and liabilities,
excluding the effects of acquisitions:
(Increase) decrease in accounts receivable,
net (15,725) 16,927
Decrease (increase) in retained interest in
receivables sold, net 111,269 (74,085)
Increase in inventory (25,792) (68,201)
Increase in other assets (25,052) (3,745)
Increase in accounts payable 13,588 44,743
Increase in accrued liabilities 15,414 8,532
Increase in deferred credits 4,220 2,651
Increase in other liabilities 11,362 2,204
Net cash provided by operating
activities 218,373 47,042
Cash Flows From Investing Activities:
Acquisitions, net of cash acquired (123,530) - -
Capital expenditures (31,313) (19,722)
Proceeds from the disposition of property,
plant and equipment 56 10,003
Net cash used in investing activities (154,787) (9,719)
Cash Flows From Financing Activities:
Retirements and principal payments of debt - - (24)
Net borrowings under revolver 3,000 700
Issuance of treasury stock 22,961 9,635
Acquisition of treasury stock, at cost (84,540) (40,908)
Payment of employee withholding tax related
to stock option exercises (3,368) (1,435)
Net cash used in financing activities (61,947) (32,032)
Effect of exchange rate changes on cash and
cash equivalents 57 121
Net change in cash and cash equivalents 1,696 5,412
Cash and cash equivalents, beginning of period 15,719 10,307
Cash and cash equivalents, end of period $17,415 $15,719
United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Debt to Total Capitalization
(dollars in thousands)
December 31,
2005 2004 Change
Long-term debt $21,000 $18,000 $3,000
Accounts receivable sold 225,000 118,500 106,500
Total debt and
securitization
(adjusted debt) 246,000 136,500 109,500
Stockholders' equity 768,512 737,071 31,441
Total capitalization $1,014,512 $873,571 $140,941
Adjusted debt to total
capitalization 24.2% 15.6% 8.6%
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. Management 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 For the Twelve
Months Ended Months Ended Forecast
December 31, December 31, Year Ending
2005 2004 2005 2004 2006
Net cash used
in investing
activities $9,424 $9,031 $154,787 $9,719 $N/A
Acquisitions 1,676 - - (123,530) - - N/A
Net cash used
in investing
activities
before the
impact of
acquisitions $11,100 $9,031 $31,257 $9,719 $N/A
Capital
expenditures $11,134 $9,064 $31,313 $19,722 $N/A
Proceeds from
the disposition
of property,
plant and
equipment (34) (33) (56) (10,003) N/A
Net cash used
in investing
activities
before the
impact of
acquisitions 11,100 9,031 31,257 9,719 N/A
Capitalized
software 2,452 1,475 16,961 3,659 N/A
Net capital
spending $13,552 $10,506 $48,218 $13,378 $48,000
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. Management believes that it is helpful
to provide readers of its financial statements with this same
information.
United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures - continued
Adjusted Cash Flow
(in thousands)
For the Years Ended
December 31,
2005 2004
Cash Flows From Operating Activities:
Net cash provided by operating activities $218,373 $47,042
Excluding the change in accounts
receivable sold (106,500) 31,500
Net cash provided by operating activities
excluding the effects of receivables sold $111,873 $78,542
Cash Flows From Financing Activities:
Net cash used in financing activities $(61,947) $(32,032)
Including the change in accounts
receivable sold 106,500 (31,500)
Net cash provided by (used in) financing
activities including the effects
of receivables sold $44,553 $(63,532)
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. Management 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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