United Stationers Reports Third Quarter 2009 Results

http://www.businesswire.com/news/home/20091029006578/en

DEERFIELD, Ill.--(Business Wire)--
United Stationers Inc. (NASDAQ: USTR), a leading North American wholesale
distributor of business products, today reported its third quarter 2009 results.

Third Quarter Financial Highlights

* GAAP diluted earnings per share were $1.38, versus $1.39 a year ago. Excluding
a year-ago gain on selling two distribution centers, 2009 earnings per share
rose nearly 10% from an adjusted $1.26(1).
* Year-to-date net cash provided by operating activities totaled $294.5 million,
versus $65.4 million last year. Excluding accounts receivable sold, net cash
provided by operating cash activities was $317.5 million(1)
versus $91.4 million(1) last year.
* Sales for the third quarter declined 6.8% to $1.25 billion.
* Gross margin was 14.8% of sales, flat with last year`s third quarter.
* Operating expenses were $126.3 million, or 10.1% of sales, compared with
$136.1 million, or 10.2% of sales in the 2008 quarter. Excluding the gain on
selling two distribution centers, adjusted operating expenses were $141.2
million(1) or 10.6%(1) of sales last year.
* Operating income was $58.6 million, or 4.7% of sales, versus $61.8 million, or
4.6% of sales, in the prior-year quarter. Excluding the gain mentioned above,
adjusted 2008 operating income was $56.7 million(1) or 4.2%(1) of sales.
* Net income was $33.5 million versus $33.1 million in the prior-year quarter.
Excluding the 2008 gain, year-ago net income was $29.9 million(1).

"While market conditions remained difficult, United`s sales results showed
modest sequential improvement from the second quarter," said Richard W.
Gochnauer, president and chief executive officer. "This reflected the progress
we made on our growth initiatives and continued high demand for flu-related
jan/san products. Our strong execution of diligent cost management and working
capital controls helped us counter the effects of lower sales compared with last
year. Cash flow generation continued at a record pace, enhancing our financial
strength and flexibility. We have achieved these results, in this difficult
economy, through the hard work and leadership of our associates."

Third Quarter Performance

Sales in the third quarter of 2009 declined by 6.8% to $1.25 billion, compared
with last year`s $1.34 billion. Revenue for the quarter was negatively affected
by weak economic conditions across all product categories. However, the
year-over-year rate of decline within the office products and furniture
categories slowed marginally in the third quarter compared with the second
quarter, while the janitorial/breakroom category experienced slightly greater
growth from flu-related product demand and growth initiatives. The technology
supplies category saw a slightly greater decline from the second quarter,
reflecting timing shifts versus the prior year. Sales within the industrial
supplies category continued to be negatively affected by distributor destocking
and the current weakness in U.S. manufacturing, oil and gas pipeline, and
commercial construction spending.

Gross margin in the most recent quarter reached $184.9 million, compared with
$197.9 million for the same quarter a year ago. Gross margin as a percent of
sales was 14.8%, matching the prior-year quarter. During the third quarter of
2009, gross margin was affected by downward pressure from a lower margin sales
mix and a significant decline in the year-over-year effect of inflation. These
pressures were offset by continued cost reduction strategies, lower fuel costs,
reduced inventory obsolescence and lower LIFO inventory reserve requirements.

Operating expenses for the latest quarter were $126.3 million, or 10.1% of
sales, compared with $136.1 million, or 10.2% of sales, in the same quarter last
year. During the 2008 quarter, the company sold two distribution centers,
resulting in a pre-tax gain of approximately $5.1 million. Operating expenses in
the 2009 quarter reflected the cost containment actions within payroll and
payroll-related areas, as well as other discretionary items. In addition,
year-over-year bad debt expense declined as the need to increase accounts
receivable reserves slowed.

Operating income for the latest quarter was $58.6 million, or 4.7% of sales,
compared with $61.8 million, or 4.6% of sales, a year ago. After adjusting for
the gain mentioned earlier, operating income for the 2008 quarter was $56.7
million(1) or 4.2%(1) of sales.

Net income for the quarter was $33.5 million, compared with $33.1 million in the
same period last year. In addition to the factors mentioned above, third quarter
2009 net income was positively affected by lower charges related to the
receivables securitization facility due to significantly lower funding needs and
a lower effective tax rate from favorable income tax resolutions.

Diluted earnings per share for the 2009 quarter were $1.38, down slightly from
$1.39 in the prior-year quarter. Adjusted for the item previously noted,
earnings per share for the 2008 quarter were $1.26(1).

Nine-month Results

Net sales for the nine months ended September 30, 2009 declined by a
workday-adjusted 7.7% to $3.5 billion, compared with $3.8 billion, with one
fewer selling day in 2009. GAAP diluted earnings per share for the year-to-date
were $2.85, compared with $3.18 in the prior year. Adjusted to exclude items
previously disclosed, diluted earnings per share for the latest nine months were
$2.94(1) compared to $3.10(1) for the same period in 2008.

Cash Flow and Debt Trends

Net cash provided by operating activities totaled $294.5 million for the latest
nine-month period, versus cash provided of $65.4 million a year ago. Excluding
the effects of accounts receivable sold, net cash provided by operating
activities for the period ending September 30, 2009 was $317.5 million(1),
compared with $91.4 million(1) in the prior year. Cash flow used in investing
activities totaled $8.8 million in 2009, down from $20.6 million last year.
Capital spending through the nine months was $8.9 million and is expected to be
approximately $15 million for the full year.

Outstanding debt totaled $441.8 million at September 30, 2009. Outstanding debt
plus securitization financing was down $272.0 million(1) during the past 12
months.

"Strong cash flow generation is a hallmark of United`s business model and is
further magnified in a declining sales environment when working capital
contracts," said Gochnauer. "We effectively reduced inventories and increased
inventory turnover during the quarter and year-to-date, while supporting our
customers with high service levels. United`s strong balance sheet and access to
cost-effective liquidity, puts the company in a good position to weather the
recession and support working capital needs when sales recover."

Outlook

"Our markets showed some signs of stabilization during the third quarter,
although further deterioration in unemployment trends and weak manufacturing
activity are concerning as we look forward," Gochnauer stated. "October sales
are tracking about even with last year. Sequentially, sales are benefitting from
prior-year timing shifts and a sales decrease in last year`s fourth quarter when
economic activity dropped off. We also continue to see a positive impact from
our internal initiatives and sales of flu-related products."

"The current rate of product price inflation is low in contrast with last year`s
unusually high inflation, which is expected to depress margins in the near term.
Given the fragile economic outlook, we will remain focused on keeping costs and
working capital aligned with sales. We expect some cost headwinds as we begin to
rollback temporary cost reductions and continue investing in innovation of our
core distribution and marketing capabilities. We are confident that our unique
distribution and marketing services can help our suppliers and customers
navigate these challenging times and will enable United to emerge from the
recession in a stronger position," concluded Gochnauer.

Conference Call

United Stationers will hold a conference call, including a question and answer
session on Friday, October 30, 2009 at 10:00 a.m. CT, to discuss third quarter
results. To participate, callers within the U.S. should dial (800) 762-8779 and
international callers should dial (480) 629-9771 about 10 minutes before the
presentation. Provide the operator with the conference call title "Q3 2009
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 a
financial slide presentation and 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 therefore 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 who 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. 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.

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.

Company Overview

United Stationers Inc. is a leading wholesale distributor of business products,
with net sales for 2008 of approximately $5.0 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 65 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. 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.

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

For the Three Months Ended For the Nine Months Ended
September 30, September 30,
2009 2008 2009 2008

Net sales $ 1,246,743 $ 1,337,855 $ 3,527,245 $ 3,841,664
Cost of goods sold 1,061,847 1,139,995 3,014,600 3,277,480
Gross profit 184,896 197,860 512,645 564,184

Operating expenses:
Warehousing, marketing and 126,282 136,055 383,907 414,756
administrative expenses

Operating income 58,614 61,805 128,738 149,428

Interest expense, net 6,645 6,380 20,774 20,123

Other expense, net - - 2,063 204 6,296

Income before income taxes 51,969 53,362 107,760 123,009

Income tax expense 18,501 20,293 39,613 47,150

Net income $ 33,468 $ 33,069 $ 68,147 $ 75,859

Net income per share - diluted $ 1.38 $ 1.39 $ 2.85 $ 3.18
Weighted average number of 24,218 23,721 23,935 23,883
common shares − diluted

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

As of September 30, As of
ASSETS 2009 2008 Dec. 31, 2008
Current assets:
Cash and cash equivalents $ 75,209 $ 41,804 $ 10,662
Accounts receivable, net* 645,704 531,323 610,210
Inventories 533,894 691,258 680,516
Other current assets 32,497 35,692 33,857
Total current assets 1,287,304 1,300,077 1,335,245

Property, plant and equipment, net 136,872 156,327 153,014
Intangible assets, net 64,172 68,937 67,982
Goodwill, net 314,429 317,025 314,441
Other long-term assets 14,488 12,751 10,834
Total assets $ 1,817,265 $ 1,855,117 $ 1,881,516

LIABILITIES AND STOCKHOLDERS` EQUITY
Current liabilities:
Accounts payable $ 431,814 $ 503,530 $ 341,084
Accrued liabilities 177,726 190,714 186,530
Total current liabilities 609,540 694,244 527,614

Deferred income taxes - - 27,244 - -
Long-term debt 441,800 491,800 663,100
Other long-term liabilities 110,753 50,644 125,164
Total liabilities 1,162,093 1,263,932 1,315,878

Stockholders' equity:
Common stock, $0.10 par value; authorized − 100,000,000 3,722 3,722 3,722
shares, issued - 37,217,814 shares in 2009 and 2008
Additional paid-in capital 383,353 380,112 382,721
Treasury stock, at cost - 13,336,966 and 13,679,430 (703,262 ) (712,716 ) (712,944 )
shares at September 30, 2009 and 2008, respectively, and
13,687,843 shares at December 31, 2008
Retained earnings 1,025,236 934,534 957,089
Accumulated other comprehensive loss (53,877 ) (14,467 ) (64,950 )
Total stockholders' equity 655,172 591,185 565,638
Total liabilities and stockholders' equity $ 1,817,265 $ 1,855,117 $ 1,881,516

*The September 30, 2008 and December 31, 2008 accounts receivable balances do
not include $222.0 million and $23.0 million of accounts receivable sold through
a securitization program, which qualified for off-balance sheet treatment.
Retained interest in accounts receivable sold was $442.3 million at September
30, 2009, $191.6 million at September 30, 2008, and $327.9 million at December
31, 2008.

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

For the Nine Months Ended Sept. 30,
2009 2008
Cash Flows From Operating Activities:
Net income $ 68,147 $ 75,859
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 30,994 32,954
Share-based compensation 9,716 6,714
Asset impairment charge - - 6,735
Loss (gain) on the disposition of plant, property and equipment 17 (9,832 )
Amortization of capitalized financing costs 707 720
Excess tax benefits related to share-based compensation (208 ) (87 )
Deferred income taxes (14,316 ) (3,673 )
Changes in operating assets and liabilities:
Increase in accounts receivable and retained interest (35,690 ) (105,934 )
in receivables sold, net
Decrease in inventory 146,590 29,302
Decrease in other assets 5,461 3,334
Increase in accounts payable 94,936 84,832
Decrease in checks in-transit (4,184 ) (29,752 )
Decrease in accrued liabilities (9,296 ) (12,558 )
Increase (decrease) in other liabilities 1,588 (13,218 )
Net cash provided by operating activities 294,462 65,396
Cash Flows From Investing Activities:
Capital expenditures (8,875 ) (25,798 )
Proceeds from the disposition of property, plant and equipment 95 18,170
Acquisitions - - (12,944 )
Net cash used in investing activities (8,780 ) (20,572 )
Cash Flows From Financing Activities:
Net (repayments) borrowings under Revolving Credit Facility (221,300 ) 40,800
Net proceeds from share-based compensation arrangements 865 1,898
Acquisition of treasury stock, at cost - - (67,505 )
Excess tax benefits related to share-based compensation 208 87
Payment of debt issuance costs (897 ) (256 )
Net cash used in financing activities (221,124 ) (24,976 )
Effect of exchange rate changes on cash and cash equivalents (11 ) (1 )
Net change in cash and cash equivalents 64,547 19,847
Cash and cash equivalents, beginning of period 10,662 21,957
Cash and cash equivalents, end of period 75,209 $ 41,804

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

Debt-to-Total Capitalization
(dollars in thousands)

As of September 30,
2009 2008 Change
Long-term debt $ 441,800 $ 491,800 $ (50,000 )
Accounts receivable sold - - 222,000 (222,000 )
Total debt and securitization (adjusted debt) 441,800 713,800 (272,000 )
Stockholders` equity 655,172 591,185 63,987
Total capitalization $ 1,096,972 $ 1,304,985 $ (208,013 )

Adjusted debt-to-total capitalization 40.3 % 54.7 % (14.4 %)

Note: Adjusted debt-to-total capitalization is provided as an additional
liquidity measure. During the first quarter of 2009, the company entered into a
new accounts receivable securitization program that was structured to maintain
accounts receivable on its balance sheet. In contrast, the prior securitization
facility was structured for off-balance sheet treatment. Generally Accepted
Accounting Principles require that accounts receivable sold under the company`s
prior receivables securitization program be reflected as a reduction in accounts
receivable and not reported as debt. Internally, the company considers these
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 these accounts receivable sold to debt, and calculates debt-to-total
capitalization on that basis.

Adjusted Cash Flow
(in thousands)

For the Nine Months Ended
September 30,
2009 2008
Cash Flows From Operating Activities:
Net cash provided by operating activities $ 294,462 $ 65,396
Excluding the change in accounts receivable sold 23,000 26,000
Net cash provided by operating activities excluding $ 317,462 $ 91,396
the effects of accounts receivable sold

Cash Flows From Financing Activities:
Net cash used in financing activities $ (221,124 ) $ (24,976 )
Including the change in accounts receivable sold (23,000 ) (26,000 )
Net cash used in financing activities including $ (244,124 ) $ (50,976 )
the effects of accounts receivable sold

Note: Net cash provided by operating activities, excluding the effects of
receivables sold is presented as an additional liquidity measure. During the
first quarter of 2009, the company entered into a new accounts receivable
securitization program that was structured to maintain accounts receivable on
its balance sheet. In contrast, the prior securitization facility was structured
for off-balance sheet treatment. Generally Accepted Accounting Principles
require that the cash flow effects of changes in the amount of accounts
receivable sold under the company`s prior receivables securitization program be
reflected within operating cash flows. Internally, the company considers these
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 these accounts receivable sold.

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

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

For the Three Months Ended September 30,
2009 2008
% to % to
Amount Net Sales Amount Net Sales

Net Sales $ 1,246.7 100.00 % $ 1,337.9 100.00 %

Gross profit $ 184.9 14.83 % $ 197.9 14.79 %

Operating expenses $ 126.3 10.13 % $ 136.1 10.17 %
Gain on sale of distribution centers - - - - 5.1 0.38 %
Adjusted operating expenses $ 126.3 10.13 % $ 141.2 10.55 %

Operating income $ 58.6 4.70 % $ 61.8 4.62 %
Operating expense item noted above - - - - (5.1 ) (0.38 )%
Adjusted operating income $ 58.6 4.70 % $ 56.7 4.24 %

Net Income $ 33.5 2.69 % $ 33.1 2.47 %
Operating expense item noted above, net of tax - - - - (3.2 ) (0.24 )%
Adjusted net income $ 33.5 2.69 % $ 29.9 2.23 %

Net income per share - diluted $ 1.38 $ 1.39
Per share operating expense item noted above - - (0.13 )
Adjusted net income per share - diluted $ 1.38 $ 1.26

Weighted average number of common shares - diluted 24.2 23.7

Note: Adjusted Operating Income, Net Income and Earnings Per Share exclude the
effects of a gain on the sale of two distribution centers. Generally Accepted
Accounting Principles require that the effects of this item be included in the
Condensed Consolidated Statements of Income. The company believes that excluding
this item 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. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures

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

For the Nine Months Ended September 30,
2009 2008
% to % to
Amount Net Sales Amount Net Sales

Net Sales $ 3,527.2 100.00 % $ 3,841.7 100.00 %

Gross profit $ 512.6 14.53 % $ 564.2 14.69 %

Operating expenses $ 383.9 10.88 % $ 414.8 10.80 %
Asset impairment charge - - - - (6.7 ) (0.17 )%
Gain on sale of distribution centers - - - - 5.1 0.13 %
Gain on sale of former corporate headquarters - - - - 4.7 0.12 %
Restructuring charge related to workforce reduction (3.4 ) (0.09 )% - - - -
Adjusted operating expenses $ 380.5 10.79 % $ 417.9 10.88 %

Operating income $ 128.7 3.65 % $ 149.4 3.89 %
Operating expense item noted above 3.4 0.09 % (3.1 ) (0.08 )%
Adjusted operating income $ 132.1 3.74 % $ 146.3 3.81 %

Net Income $ 68.1 1.93 % $ 75.9 1.98 %
Operating expense item noted above, net of tax 2.1 0.06 % (1.9 ) (0.05 )%
Adjusted net income $ 70.2 1.99 % $ 74.0 1.93 %

Net income per share - diluted $ 2.85 $ 3.18
Per share operating expense item noted above 0.09 (0.08 )
Adjusted net income per share - diluted $ 2.94 $ 3.10

Weighted average number of common shares - diluted 23.9 23.9

Note: Adjusted Operating Income, Net Income and Earnings Per Share exclude the
effects of a gain on the sale of the company`s former headquarters and two
distribution centers, an asset impairment charge related to capitalized software
development costs and a severance 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

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