2014

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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