United Stationers Reports Increased Sales and Earnings Per Share for the Second Quarter...

United Stationers Reports Increased Sales and Earnings Per Share for the Second Quarter 2008

DEERFIELD, Ill.--(Business Wire)--
United Stationers Inc. (NASDAQ: USTR) North America's largest
broad line wholesale distributor of business products, today reported
its second quarter 2008 results.

Second Quarter Financial Highlights

-- GAAP diluted earnings per share rose 8% to $0.91 from $0.84.
Non-GAAP diluted earnings per share increased 14% to $0.96(1),
after excluding a pre-tax gain of $4.7 million on the sale of
the company's former corporate headquarters, and a $6.7
million pre-tax asset impairment charge related to capitalized
software development costs.

-- Net sales for the second quarter increased nearly 10% to $1.25
billion.

-- Gross margin was 14.5% of sales, down 33 basis points from
last year's second quarter.

-- Operating expenses were $138.8 million, or 11.1% of sales,
compared with $122.6 million, or 10.7% of sales in the 2007
quarter. Excluding the items referred to above, this year's
operating expenses for the quarter were $136.8 million(1) or
10.9%(1) of sales.

-- Second quarter 2008 operating margin was 3.5%, versus 4.1% in
the prior-year quarter. Excluding the items mentioned earlier,
this year's second quarter operating margin was 3.6%(1) .

-- Net cash provided by operating activities for the latest six
months totaled $63.0 million, versus net cash provided of
$99.9 million for the same period last year. Excluding the
impact of accounts receivable sold, net cash provided by
operating activities for the six months ended June 30, 2008
was $61.0 million(1) versus $74.9 million(1) in the same
period last year.

"Executing our sales and operational initiatives enabled us to
make progress on many fronts during the quarter, despite continued
soft economic conditions," said Richard W. Gochnauer, president and
chief executive officer. "Sales growth rates improved sequentially
from the first quarter across most product categories, and were
boosted by a strong contribution from the ORS Nasco acquisition.
Margins decreased, reflecting lower sales of high margin discretionary
products within categories, reduced product cost inflation and
significantly higher fuel costs. We have taken actions to offset the
effects of the economic slowdown - including growth initiatives,
margin improvement actions and further cost reductions - while
continuing to invest in key strategic initiatives. Further gains in
working capital efficiency contributed to strong cash flow results."

Second Quarter Performance

Sales in the second quarter of 2008 rose by $110.1 million, a 9.7%
increase over the prior year. Seven percent of the growth rate came
from ORS Nasco, which was acquired in December 2007. The latest
quarter also benefited from the timing of the Easter holiday, which
fell in the first quarter versus the second quarter of last year.
Sales were up nearly 14.4% in the janitorial/breakroom category, up
modestly in office products and technology, and partially offset by an
8% decrease in furniture sales.

Gross margin in the second quarter of 2008 reached $182.0 million,
compared with $169.7 million in the same period last year. Gross
margin as a percent of sales for the second quarter of 2008 was 14.5%,
down 33 basis points from the prior-year quarter. Gross margin faced
downward pressure from a lower margin sales mix within categories,
lower product cost inflation and higher fuel costs. Partially
offsetting these unfavorable variances were increased supplier
allowances, actions taken to offset fuel cost inflation, as well as an
approximate 20 basis point benefit from higher margins at ORS Nasco.

Operating expenses for the latest quarter were $138.8 million, or
11.1% of sales, compared with $122.6 million, or 10.7% of sales, in
the same quarter last year. The increase in operating expense includes
$9.5 million from ORS Nasco. During the 2008 quarter, the company
completed the sale of its former corporate headquarters, which
resulted in a pre-tax gain of $4.7 million. Conversely, the company
recorded a pre-tax asset impairment charge of $6.7 million related to
the SAP Hosted Solution for Business Products Resellers project, also
known as Reseller Technology Solution (RTS). Excluding the impact of
these items, second quarter operating expenses were $136.8 million(1)
or 10.9%(1) of sales. The adjusted increase to last year was due to
higher expenses to fund various strategic initiatives such as facility
relocation projects, as well as general inflation, which were
partially offset by cost reduction actions.

"We are committed to helping third party software companies
provide our office products dealers with superior technology platforms
which include e-commerce and backoffice solutions to help them meet
their customers' needs," said Mr. Gochnauer. "To facilitate this,
United has invested in electronic catalog technology, digital content,
and third party software solutions - including RTS. Due to delays in
bringing RTS to market, and the acceleration of the development of
other software solutions, we took a charge related to capitalized
costs for our portion of RTS. Despite this charge, we are encouraged
by the recent progress of RTS as well as other software solutions,
which will utilize our new electronic catalog technology and
superior digital content to provide end consumers with the excellent
shopping experience they desire."

Operating income for the latest quarter was $43.2 million, or 3.5%
of sales, compared with $47.1 million, or 4.1% of sales, in the second
quarter of 2007. After adjusting for the items mentioned earlier,
operating income for the most recent quarter was $45.2 million(1) or
3.6%(1) of sales.

Diluted earnings per share for the 2008 quarter were $0.91,
compared with $0.84 in the prior-year quarter. Adjusted for the items
previously noted, earnings per share for the current-year quarter were
$0.96(1). Earnings per share for this period included approximately
$0.08 per share from ORS Nasco.

Six-Month Performance

Sales in the first half of 2008 rose $169.3 million, representing
a 7.3% increase over the prior year, with 6.6% related to ORS Nasco.
Diluted earnings per share for year-to-date 2008 were $1.79, compared
with $1.74 in the prior year. Adjusted for the items mentioned
earlier, earnings per share for the latest six months were $1.84(1) up
from $1.77(1) in the prior year, after excluding a $1.4 million
pre-tax restructuring charge. Earnings per share for the first half of
2008 included approximately $0.12 per share from ORS Nasco.

Cash Flow and Debt Trends

"Working capital and balance sheet management remain a priority,"
commented Gochnauer. "Our inventory management teams have achieved
turnover improvements while delivering the exceptional service our
customers expect. This enabled us to produce strong cash flow and
maintain a solid financial position, with debt at targeted levels. We
have confidence in our cash flow outlook for the year, and will
continue to take a measured approach in using our cash flow for
priority capital projects, investment buys, acquisitions and share
repurchases, while maintaining our strong capital structure."

Net cash provided by operating activities totaled $63.0 million
for the six months ended June 30, 2008, versus cash provided of $99.9
million a year ago. Excluding the effects of accounts receivable sold,
net cash provided by operating activities for the first half was $61.0
million(1), compared with $74.9 million(1) in the prior year. Cash
flow used in investing activities totaled $9.7 million in 2008.
Capital spending for the six months was $19.8 million and is expected
to be approximately $30 million for 2008.

Outstanding debt totaled $466.8 million at June 30, 2008, up
$323.3 million from the same time last year. Outstanding debt plus
securitization financing totaled $716.8 million(1) at June 30, 2008,
up $323.3 million(1) during the past 12 months. The increase in debt
outstanding reflected share repurchases during the past year totaling
$300 million, and the acquisition of ORS Nasco in December 2007 for
approximately $180 million, partially offset by cash flow from
operating activities of $181 million during this time.

Outlook

"We are encouraged by our second quarter results and the positive
impact of our internal initiatives. The July sales growth trend is in
line with our year-to-date June growth rate," Gochnauer stated.

"Our supplier and reseller partners continue to tell us that the
marketing and distribution services we offer as a wholesaler are even
more critical during times of slow growth, high fuel costs and tight
credit markets. Given strong economic headwinds, we are focused on
diligent cost controls and working capital management, while pursuing
growth opportunities in targeted channels and categories. In addition,
we expect higher product cost inflation in the second half of the
year, based on announced supplier price increases," Gochnauer
concluded.

Conference Call

United Stationers will hold a conference call followed by a
question and answer session on Friday, August 1, 2008 at 10:00 a.m.
CT, to discuss second quarter results. To participate, callers within
the U.S. should dial (800) 762-8795 and international callers should
dial (480) 248-5085 approximately 10 minutes before the presentation.
Provide the operator with the conference call title "Q2 2008 United
Stationers Earnings Conference Call." To listen to the webcast,
participants should visit the Investor Information section of the
company's Web site at 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. This news release, along with other
information relating to the call, also will be available on United's
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 reliance
on key customers, and the business, credit and other risks inherent in
continuing or increased customer concentration; United's reliance on
independent dealers for a significant percentage of its net sales and
the importance of the continued independence, viability and success of
these dealers; continuing or increasing competitive activity and
pricing pressures within existing or expanded product categories,
including competition from product manufacturers that sell directly to
United's customers; prevailing economic conditions and changes
affecting the business products industry and the general economy;
United's reliance on key suppliers; the impact of variability in
supplier pricing, allowance programs, promotional incentives and other
terms, conditions and policies; the impact of variability in customer
and end-user demand patterns on United's product offerings and sales
mix and, in turn, on customer rebates payable and supplier allowances
earned by United; United's ability to maintain its existing
information technology systems and to successfully procure and
implement new systems without business disruption or other
unanticipated difficulties or costs; United's ability to effectively
identify, consummate and integrate acquisitions; 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
company does not undertake to update any forward-looking statement,
and investors are advised to consult any further disclosure by United
on this matter 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 these
items to be exhaustive or complete.

Company Overview

United Stationers Inc. is North America's largest broad line
wholesale distributor of business products, with net sales for 2007 of
$4.6 billion. The company stocks over 100,000 items, including
technology products, traditional office products, janitorial and
breakroom supplies, office furniture, and industrial supplies. A
network of 67 distribution centers allows it to deliver these products
to approximately 30,000 reseller customers. This network, combined
with United's depth and breadth of inventory, enables the company to
ship most products overnight to more than 90% of the U.S. and major
cities in Mexico. United's focus on fulfillment excellence has given
it an average line fill rate of better than 97%, a 99.6% order
accuracy rate, and a 99% on-time delivery rate. For more information,
visit www.unitedstationers.com.

United Stationers' common stock trades on the NASDAQ Global Select
Market under the symbol USTR.

(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.

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*T
United Stationers Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)

For the Three Months For the Six Months
Ended Ended
June 30, June 30,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------

Net sales $1,251,335 $1,141,205 $2,503,809 $2,334,521
Cost of goods sold 1,069,312 971,527 2,137,485 1,984,782
---------- ---------- ---------- ----------
Gross profit 182,023 169,678 366,324 349,739

Operating expenses:
Warehousing, marketing
and
administrative expenses 138,806 122,598 278,701 250,355
Restructuring charge - - - - - - 1,378
---------- ---------- ---------- ----------

Total operating
expenses 138,806 122,598 278,701 251,733
---------- ---------- ---------- ----------

Operating income 43,217 47,080 87,623 98,006

Interest expense, net 6,442 3,137 13,743 5,167

Other expense, net 1,992 3,648 4,233 7,059
---------- ---------- ---------- ----------

Income before income taxes 34,783 40,295 69,647 85,780

Income tax expense 13,309 16,186 26,857 34,432
---------- ---------- ---------- ----------

Net income $21,474 $24,109 $42,790 $51,348
========== ========== ========== ==========

Net income per common
share -
diluted $0.91 $0.84 $1.79 $1.74
========== ========== ========== ==========
Weighted average number of
common shares - diluted 23,659 28,798 23,968 29,515
========== ========== ========== ==========
*T

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United Stationers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)

As of June 30, As of
-----------------------
ASSETS Dec. 31,
2008 2007 2007
----------- ----------- -----------
Current assets:
Cash and cash equivalents $24,625 $10,780 $21,957
Accounts receivable, net 316,848 246,218 321,305
Retained interest in
receivables sold, net(2) 123,580 130,272 94,809
Inventories 643,316 614,396 715,161
Other current assets 35,059 36,741 38,595
----------- ----------- -----------
Total current assets 1,143,428 1,038,407 1,191,827

Property, plant and equipment,
net 160,695 169,428 173,123
Intangible assets, net 66,426 25,479 68,756
Goodwill, net 314,359 225,816 315,526
Other long-term assets 15,639 16,916 16,323
----------- ----------- -----------
Total assets $1,700,547 $1,476,046 $1,765,555
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable $436,870 $367,067 $448,608
Accrued liabilities 160,461 165,399 199,961
----------- ----------- -----------
Total current
liabilities 597,331 532,466 648,569

Deferred income taxes 29,092 12,429 30,172
Long-term debt 466,800 143,500 451,000
Other long-term liabilities 49,319 54,241 61,560
----------- ----------- -----------
Total liabilities 1,142,542 742,636 1,191,301

Stockholders' equity:
Common stock, $0.10 par value;
authorized - 100,000,000
shares, issued - 37,217,814
shares in 2008 and 2007 3,722 3,722 3,722
Additional paid-in capital 381,033 371,662 376,379
Treasury stock, at cost -
shares 13,823,813 and
9,178,785 shares at June 30,
2008 and 2007,
respectively and 12,645,513
shares at December 31, 2007 (716,581) (430,089) (650,187)
Retained earnings 901,465 803,484 859,292
Accumulated other
comprehensive loss (11,634) (15,369) (14,952)
----------- ----------- -----------
Total stockholders' equity 558,005 733,410 574,254
----------- ----------- -----------
Total liabilities and
stockholders' equity $1,700,547 $1,476,046 $1,765,555
=========== =========== ===========
*T

(2)The June 30, 2008 and 2007 and December 31, 2007 accounts
receivable balances exclude $250.0 million, $250.0 million and $248.0
million, respectively, of accounts receivable sold through a
securitization program.

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United Stationers Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)

For the Six Months
Ended June 30,
------------------
2008 2007
-------- ---------
Cash Flows From Operating Activities:
Net income $42,790 $51,348
Adjustments to reconcile net income to net
cash provided by
operating activities:
Depreciation and amortization 22,520 21,803
Share-based compensation 4,386 3,989
Asset impairment charge 6,727 - -
Write down of assets held for sale - - 546
(Gain) loss on the disposition of property,
plant and equipment (4,759) 121
Amortization of capitalized financing costs 515 460
Excess tax benefits related to share-based
compensation (323) (5,367)
Deferred income taxes (2,757) (4,615)
Changes in operating assets and liabilities,
excluding the effects of
acquisitions:
Decrease in accounts receivable, net 4,820 27,662
Increase in retained interest in
receivables sold, net (28,771) (23,124)
Decrease in inventory 72,157 66,791
Decrease (increase) in other assets 5,509 (8,760)
Increase in accounts payable 9,673 29,232
Decrease in checks in-transit (21,125) (44,796)
Decrease in accrued liabilities (35,987) (9,923)
Decrease in other liabilities (12,411) (5,476)
-------- ---------
Net cash provided by operating
activities 62,964 99,891
Cash Flows From Investing Activities:
Capital expenditures (19,762) (6,833)
Sale of Canadian Division - - 1,295
ORS Nasco acquisition purchase price
adjustment 360 - -
Proceeds from the disposition of property,
plant and equipment 9,707 6
-------- ---------
Net cash used in investing activities (9,695) (5,532)
Cash Flows From Financing Activities:
Borrowings under Revolving Credit Facility 15,800 26,200
Net proceeds from the exercise of stock
options 1,026 21,680
Acquisition of treasury stock, at cost (67,505) (151,693)
Excess tax benefits related to share-based
compensation 323 5,367
Payment of debt issuance costs (256) (125)
-------- ---------
Net cash used in financing activities (50,612) (98,571)
-------- ---------
Effect of exchange rate changes on cash and
cash equivalents 11 3
-------- ---------
Net change in cash and cash equivalents 2,668 (4,209)
Cash and cash equivalents, beginning of period 21,957 14,989
-------- ---------
Cash and cash equivalents, end of period $24,625 $10,780
======== =========
*T

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United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures

Debt-to-Total Capitalization
(dollars in thousands)

As of June 30,
-----------------------
2008 2007 Change
----------- ----------- ---------
Long-term debt $466,800 $143,500 $323,300
Accounts receivable sold 250,000 250,000 - -
----------- ----------- ---------
Total debt and securitization
(adjusted debt) 716,800 393,500 323,300
Stockholders' equity 558,005 733,410 (175,405)
----------- ----------- ---------
Total capitalization $1,274,805 $1,126,910 $147,895
=========== =========== =========

Adjusted debt to total
capitalization 56.2% 34.9% 21.3%
=========== =========== =========
*T

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.

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*T
Adjusted Cash Flow
(in thousands)

For the Six Months
Ended
June 30,
2008 2007
Cash Flows From Operating Activities:
Net cash provided by operating activities $62,964 $99,891
Excluding the change in accounts receivable
sold (2,000) (25,000)
--------- ---------
Net cash provided by operating activities
excluding the effects
of receivables sold $60,964 $74,891
========= =========

Cash Flows From Financing Activities:
Net cash used in financing activities $(50,612) $(98,571)
Including the change in accounts receivable
sold 2,000 25,000
--------- ---------
Net cash used in financing activities
including
the effects of receivables sold $(48,612) $(73,571)
========= =========
*T

Note: Net cash provided by operating activities, excluding the
effects of receivables sold 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.

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*T
United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income and Earnings Per Share
(in millions, except per share data)

For the Three Months Ended June 30,
-----------------------------------
2008 2007
------------------ ----------------
% to % to
Net Net
Amount Sales Amount Sales
--------- -------- -------- -------

Sales $1,251.3 100.00% $1,141.2 100.00%
========= ======== ======== =======

Gross profit $182.0 14.54% $169.7 14.87%

Operating Expenses $138.8 11.09% $122.6 10.74%
Asset impairment charge (6.7) -0.54% - - - -
Gain on the sale of the former
corporate headquarters 4.7 0.38% - - - -
--------- -------- -------- -------

Adjusted operating expenses $136.8 10.93% $122.6 10.74%
========= ======== ======== =======

Operating income $43.2 3.45% $47.1 4.13%
Operating expense items noted
above 2.0 0.16% - - - -
--------- -------- -------- -------
Adjusted operating income $45.2 3.61% $47.1 4.13%
========= ======== ======== =======

Net income per share - diluted $0.91 $0.84
Per share operating expense items
noted above 0.05 - -
--------- --------
Adjusted net income per share -
diluted $0.96 $0.84
========= ========

Weighted average number of common
shares - diluted 23,659 28,798
*T

Note: Adjusted Operating Income and Earnings Per Share exclude the
effects of a gain on the sale of the company's former headquarters and
the asset impairment charge related to RTS. Generally Accepted
Accounting Principles require that the effects of these items be
included in the Condensed Consolidated Statements of Income. The
company believes that excluding these items is an appropriate
comparison of its ongoing operating results to last year and that it
is helpful to provide readers of its financial statements with a
reconciliation of these items to its Condensed Consolidated Statements
of Income reported in accordance with Generally Accepted Accounting
Principles.

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*T
United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures

Adjusted Operating Income and Earnings Per Share
(in millions, except per share data)

For the Six Months Ended June 30,
-----------------------------------
2008 2007
----------------- -----------------
% to % to
Net Net
Amount Sales Amount Sales
--------- ------- --------- -------

Sales $2,503.8 100.00% $2,334.5 100.00%
========= ======= ========= =======

Gross profit $366.3 14.63% $349.7 14.98%

Operating expenses $278.7 11.13% $251.7 10.78%
Restructuring charge - - - - (1.4) -0.06%
Asset impairment charge (6.7) -0.27% - - - -
Gain on sale of the former
corporate headquarters 4.7 0.19% - - - -
--------- ------- --------- -------
Adjusted operating expenses $276.7 11.05% $250.3 10.72%
========= ======= ========= =======

Operating income $87.6 3.50% $98.0 4.20%
Operating expense items noted
above 2.0 0.08% 1.4 0.06%
--------- ------- --------- -------
Adjusted operating income $89.6 3.58% $99.4 4.26%
========= ======= ========= =======

Net income per share - diluted $1.79 $1.74
Per share operating expense items
noted above 0.05 0.03
--------- ---------
Adjusted net income per share -
diluted $1.84 $1.77
========= =========

Weighted average number of common
shares - diluted 23,968 29,515
*T

Note: Adjusted Operating Income and Earnings Per Share exclude the
effects of a gain on the sale of the company's former headquarters,
the asset impairment charge related to RTS and a restructuring charge.
Generally Accepted Accounting Principles require that the effects of
these items be included in the Condensed Consolidated Statements of
Income. The company believes that excluding these items is an
appropriate comparison of its ongoing operating results to last year
and that it is helpful to provide readers of its financial statements
with a reconciliation of these items to its Condensed Consolidated
Statements of Income reported in accordance with Generally Accepted
Accounting Principles.

United Stationers Inc.
Richard W. Gochnauer
President and Chief Executive Officer
or
Victoria J. Reich
Sr. Vice President and Chief Financial Officer
(847) 627-7000

Copyright Business Wire 2008