United Stationers Posts First Quarter 2014 EPS of $0.55

DEERFIELD, Ill., April 23, 2014 /PRNewswire/ -- United Stationers (NASDAQ:  USTR) today announced that net income for the quarter ended March 31, 2014, was $21.9 million, or $0.55 per share, compared with $13.9 million, or $0.34 per share, in 2013.  The 2013 results included a charge of $0.22 per share related to workforce reductions and facility closures.  Adjusted to exclude the charge, 2013 net income was $22.8 million(1), or $0.56(1) per share.    

Financial Highlights

  • Sales were $1.254 billion compared with $1.250 billion in 2013
  • Operating income was $38.2 million, or 3.0 percent of sales, versus $25.2 million, or 2.0 percent of sales last year; adjusted 2013 operating income was $39.7 million(1), or 3.2 percent of sales
  • Earnings per share were $0.55, down slightly from $0.56(1) in 2013 on an adjusted basis
  • Cash flow from operating activities was $1.5 million versus a use of $13.4 million in 2013

First Quarter Performance

Sales were $1.254 billion, up 0.3 percent.  Sales in janitorial and breakroom supplies rose 2.3 percent to $332.7 million from $325.3 million.  Industrial supply sales increased 1.4 percent to $131.5 million from $129.7 million.  Traditional office products sales rose 1.6 percent to $325.2 million from $320.1 million in 2013.  Technology sales declined 3.0 percent to $353.5 million from $364.4 million.  Furniture sales decreased 3.8 percent to $74.8 million from $77.7 million in the prior year.

"Our team delivered solid overall performance despite difficult demand conditions, partly due to adverse weather early in the quarter.  Sales accelerated as the quarter progressed.  We continue to make strategic investments in our business and e-commerce capabilities, and we are positioned well with both manufacturers and resellers to execute our growth and diversification strategies," said Cody Phipps, United Stationers' president and chief executive officer. 

First quarter gross profit was $187.1 million, down slightly from $188.5 million in 2013.  Gross margin was 14.9 percent compared with 15.1 percent in the prior year.  The decline was a result of a change in customer and product mix, partially offset by lower inventory-related items.

Operating expenses were $148.8 million, or 11.9 percent of sales, versus $163.3 million, or 13.1 percent of sales, in 2013.  Adjusted for the charge, 2013 operating expenses were $148.9 million(1), or 11.9 percent of sales. 

Operating income was $38.2 million, or 3.0 percent of sales, compared with $25.2 million, or 2.0 percent of sales, a year ago.  Adjusted for the charge, 2013 operating income was $39.7 million(1), or 3.2 percent of sales.

Net interest expense was $3.4 million compared with $3.1 million in 2013.  The increase primarily was due to the issuance of seven-year notes to fix the interest rate on a portion of the company's debt.   

Cash Flow and Debt

Net cash provided by operating activities in the first quarter was $1.5 million, compared with a use of $13.4 million in 2013.  The year-over-year improvement in operating cash flow was attributable primarily to a decrease in contributions to the pension plans.  Capital expenditures in the first quarter were $6.4 million compared with $9.1 million in 2013. 

The company has total committed funding sources of approximately $1.0 billion.  As of March 31, 2014, the company had total debt outstanding of $562.5 million compared with $537.0 million as of March 31, 2013.  As of March 31, 2014 and 2013, debt-to-total capitalization was 40.4 percent and 41.6 percent, respectively.  In the first quarter of 2014, the company repurchased 0.3 million shares for $12.5 million and paid $5.5 million in dividends to shareholders.

Outlook

"We recently completed the bid process at Office Depot.  As a result of this process, we were named the second call office products supplier, which will result in the loss of some business.  However, we were also named the primary supplier for janitorial and breakroom products, which will result in some new business and is consistent with our diversification strategy into growth categories.  Many factors can influence the financial impact of this specific customer situation, but absent any mitigating actions we will take, we estimate a reduction in earnings per share in a range of $0.05 to $0.08 in the second half of 2014.  Office Depot continues to be a valued customer, and we look forward to supporting both categories of business.  We also remain well positioned with a robust sales pipeline and active discussions regarding new business with a range of strategic customers," Phipps commented.   

"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.  We continue to see opportunities for growth in the janitorial and breakroom, industrial, and online markets and plan to capitalize on them," Phipps concluded.        

Conference Call

United Stationers ("United Stationers" or "United") will hold a conference call followed by a question and answer session on Thursday, April 24, 2014, at 10:00 a.m. CST, to discuss first quarter 2014 results.  To participate, callers within the U.S. and Canada should call 888-317-6016, and international callers should dial (412) 317-6016 approximately 10 minutes before the presentation.   The passcode is "10043281."  To listen to the webcast, participants should visit the Investors section of the company's website, and click on the "Q1-14 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, the quarterly results page, 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 supplier of business essentials, with 2013 net sales of $5.1 billion.  The company stocks a broad assortment of over 140,000 items, including technology products, traditional office products, janitorial and breakroom supplies, office furniture, and industrial supplies.  The Company's network of 64 distribution centers allows it to deliver these products to approximately 25,000 reseller customers.  This network, combined with United's breadth and depth of inventory, enables the Company to ship most products overnight to more than ninety percent of the U.S. and 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

(unaudited)

(in thousands, except per share data)

 


For the Three Months Ended

March 31,


2014


2013







Net sales

$

1,254,139


$

1,250,485

Cost of goods sold


1,067,056



1,061,960

Gross profit


187,083



188,525







Operating expenses:






   Warehousing, marketing and
        administrative expenses


148,849



163,284







Operating income


38,234



25,241







Interest expense, net


3,374



3,113







Income before income taxes


34,860



22,128







Income tax expense


13,003



8,254







Net income

$

21,857


$

13,874







Net income per share – diluted

$

0.55


$

0.34

 

Weighted average number of
   common shares − diluted


39,655



40,628










United Stationers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

(dollars in thousands, except share data)











(unaudited)


(audited)



As of March 31,


As of December 31,



2014


2013


ASSETS







Current assets:







    Cash and cash equivalents

$

26,964


$

22,326


    Accounts receivable, net


658,428



643,379



    Inventories


748,499



830,295



    Other current assets


28,766



29,255



           Total current assets


1,462,657



1,525,255











  Property, plant and equipment, net


138,907



143,050



  Goodwill


356,651



356,811



  Intangible assets, net


63,784



65,502



  Other long-term assets


27,170



25,576



           Total assets

$

2,049,169


$

2,116,194











LIABILITIES AND STOCKHOLDERS' EQUITY








  Current liabilities:








    Accounts payable

$

397,198


$

476,113



    Accrued liabilities


177,251



191,531



    Short-term debt


1,048



373



           Total current liabilities


575,497



668,017











  Deferred income taxes


26,271



29,552



  Long-term debt


561,511



533,324



  Other long-term liabilities


55,888



59,787



           Total liabilities


1,219,167



1,290,680











  Stockholders' equity:








Common stock, $0.10 par value; authorized −   100,000,000 shares, issued – 74,435,628 shares in 2014 and 2013


7,444



7,444



    Additional paid-in capital


412,109



411,954



Treasury stock, at cost – 34,971,702 shares in 2014 and 34,714,083 shares in 2013


(1,010,122)



(998,234)



    Retained earnings


1,460,582



1,444,238



    Accumulated other comprehensive loss


(40,011)



(39,888)



  Total stockholders' equity


830,002



825,514



       Total liabilities and stockholders' equity

$

2,049,169


$

2,116,194



 


 


 

United Stationers Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(unaudited)

(in thousands)



 

For the Three Months Ended March 31,



2014



2013


Cash Flows From Operating Activities:








     Net income

$

21,857



$

13,874


     Adjustments to reconcile net income to net cash provided by








         (used in) operating activities:








     Depreciation and amortization


9,523




9,475


     Share-based compensation


3,225




2,420


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


(4)




14


     Amortization of capitalized financing costs


287




224


     Excess tax benefits related to share-based compensation


(494)




(1,477)


     Deferred income taxes


(2,450)




(2,079)


Changes in operating assets and liabilities:








         (Increase) decrease in accounts receivable, net

(15,583)




26,267


         Decrease in inventory


81,714




40,828


         Increase in other assets


(1,041)




(3,999)


         Decrease in accounts payable


(47,191)




(77,404)


         (Decrease) increase in checks in-transit


(31,751)




14,201


         Decrease in accrued liabilities


(13,654)




(27,304)


         Decrease in other liabilities


(2,948)




(8,407)


             Net cash provided by (used in) operating activities


1,490




(13,367)


Cash Flows From Investing Activities:








     Capital expenditures


(6,390)




(9,096)


Proceeds from the disposition of property, plant and equipment


458




86


             Net cash used in investing activities


(5,932)




(9,010)


Cash Flows From Financing Activities:








     Net borrowings (repayments) under revolving credit facility


4,562




(37,028)


     Borrowings under receivables securitization program


9,300




49,700


     Repayment of debt


(135,000)




--


     Proceeds from the issuance of debt


150,000




--


     Net (disbursements) proceeds from share-based compensation

         arrangements


(1,704)




10,840


     Acquisition of treasury stock, at cost


(12,491)




(7,124)


Payment of cash dividends


(5,509)




(5,571)


     Excess tax benefits related to share-based compensation


494




1,477


     Payment of debt issuance costs


(605)




(345)


             Net cash provided by financing activities


9,047




11,949


     Effect of exchange rate changes on cash and cash equivalents


33




31


     Net change in cash and cash equivalents


4,638




(10,397)


     Cash and cash equivalents, beginning of period


22,326




30,919


     Cash and cash equivalents, end of period

$

26,964



$

20,522



 

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 March 31,



2014


2013



Amount


% to

Net Sales


Amount


% to

Net Sales











Net sales

$ 1,254,139


100.00 %


$ 1,250,485


100.00 %











Gross profit

$ 187,083


14.92 %


$ 188,525


15.08 %











Operating expenses

$ 148,849


11.87 %


$ 163,284


13.06 %


   Workforce reduction and facility closure charge

--


--


(14,432)


(1.15 )%


Adjusted operating expenses

$ 148,849


11.87 %


$ 148,852


11.91 %




















Operating income

$ 38,234


3.05 %


$ 25,241


2.02 %


   Operating expense items noted above

--


--


14,432


1.15 %


Adjusted operating income

$ 38,234


3.05 %


$ 39,673


3.17 %











Net income

$ 21,857




$ 13,874




   Operating expense items noted above, net of tax

--




8,948




Adjusted net income

$ 21,857




$ 22,822













Diluted earnings per share

$ 0.55




$ 0.34




   Per share operating expense items noted above

--




0.22




Adjusted diluted earnings per share

$ 0.55




$ 0. 56













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

(1.8) %

















Weighted average number of common shares — diluted

39,655




40,628




Note: Adjusted Operating Expenses, Operating Income, Net Income and Earnings Per Share in the first quarter of 2013 exclude the effects of a $14.4 million charge related to workforce reductions and facility closures. Generally Accepted Accounting Principles require that the effects of this item be included in the Condensed Consolidated Statements of Income.  Management believes that excluding this item 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 this item to its Condensed Consolidated Statements of Income reported in accordance with Generally Accepted Accounting Principles.

 

 

SOURCE United Stationers Inc.



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