DEERFIELD, Ill., Oct. 22, 2014 /PRNewswire/ — United Stationers Inc. (NASDAQ: USTR), a leading supplier of business essentials in North America, today announced financial results for the third quarter ended September 30, 2014.

Overview

• Diluted earnings per share were $0.98, compared to $1.01 in the prior-year quarter.
• Net sales increased 6.2 percent to $1.42 billion, compared to $1.34 billion in the prior-year quarter.
• Gross profit was $211.0 million, or 14.9 percent of sales, compared with $203.7 million, or 15.2 percent of sales in the prior-year quarter.
• Operating expenses were $146.6 million, or 10.3 percent of sales, compared with $136.3 million, or 10.2 percent of sales in the prior-year quarter.
• Operating income was $64.5 million, or 4.5 percent of sales, compared to $67.4 million, or 5.0 percent of sales, in the prior-year quarter.
• In September 2014, the company announced it will acquire Liberty Bell Equipment, a leading wholesaler of automotive aftermarket tools and supplies, and its affiliates (collectively, “MEDCO”) including G2S Equipment de Fabrication et d’Entretien ULC, a Canadian wholesaler. The transaction is expected to be completed in the fourth quarter of 2014 and is subject to customary closing conditions.

“Robust sales gains in our industrial, online, and janitorial and breakroom businesses drove our third quarter performance as we continue to successfully implement our diversification strategy,” said Cody Phipps, president and chief executive officer. “Our team is actively managing the inherent margin volatility related to our diversification and development of a common platform for our office products and janitorial businesses.”

Third Quarter Performance
Net sales increased 6.2 percent during the third quarter of 2014 to $1.42 billion when compared to the third quarter of last year. Sales of industrial supplies increased 24.4 percent to $163.5 million, including $21.9 million from the CPO acquisition, from $131.5 million. Janitorial and breakroom supplies sales increased 12.1 percent to $386.1 million from $344.5 million. Traditional office products sales increased 1.4 percent to $360.4 million from $355.2 million in the prior-year quarter. Technology remained flat to the prior-year quarter at $381.2 million during the third quarter of 2014. Furniture was down slightly to $84.5 million compared to $85.1 million in the prior year quarter.

Gross profit in the third quarter of 2014 increased 3.6 percent to $211.0 million, compared to $203.7 million the prior-year quarter. Gross margin declined 35 basis points from the prior-year quarter to 14.9 percent of sales. The decline in margin rate resulted from higher freight costs and higher inventory-related costs partially offset by favorable product margins.

Operating expenses for the third quarter increased to $146.6 million, or 10.3 percent of sales, due to the acquisition of CPO and higher bad debt expense. Comparatively, operating expenses were $136.3 million or 10.2 percent of sales in the third quarter of 2013.

Operating income declined to $64.5 million, compared to $67.4 million in the prior-year quarter. Operating margin declined 50 basis points to 4.5 percent of sales.

Net income was $38.2 million, or $0.98 per diluted share, compared with $40.5 million, or $1.01 per diluted share in the prior-year period.

Nine-Month Performance
Net sales in the first nine months of 2014 increased 3.4 percent to $3.99 billion, from $3.86 billion in the prior-year period. This was led by a 12.2 percent increase in industrial supplies, including $30.1 million of incremental sales from CPO, and a 7.4 percent increase in janitorial and breakroom supplies. Sales of total office products remained flat, as the declines in technology and furniture were offset by an increase in traditional office products sales.

Gross profit increased $3.5 million to $597.6 million in the first nine months of 2014, compared to $594.1 million the prior year. Gross margin declined 40 basis points to 15.0 percent of sales due to a combination of shifting customer and product mix in product margin, higher freight costs, and higher inventory-related adjustments.

Operating expenses in the first nine months of 2014 were $437.6 million, or 11.0 percent of sales, compared with $442.6 million the prior year. Operating expenses in the first nine months of 2013 included a charge for a workforce reduction and facility closure during the first quarter. Adjusted for the charge, operating expenses in the first nine months of 2013 were $428.1 million⁽¹⁾ or 11.1 percent⁽¹⁾ of sales. Year-to-date 2014, operating expenses were impacted by lower employee-related expenses offset by continued investments in the company’s growth businesses.

Operating income for the first nine months of 2014 was $160.0 million or 4.0 percent of sales, compared with $151.6 million in the prior-year period. Excluding the charge mentioned above, adjusted operating income through the first nine months of 2013 was $166.0 million⁽¹⁾ or 4.3 percent⁽¹⁾ of sales.

Net income for the first nine months of 2014 was $93.4 million, or $2.38 per diluted share, compared to $89.0 million in the first nine months of 2013. Excluding the charge mentioned above, adjusted net income in the first nine months of 2013 was $98.0 million⁽¹⁾, or $2.43⁽¹⁾ per diluted share.

Cash Flow, Debt Trends and Share Repurchases
Net cash provided by operating activities for the nine months ended September 30, 2014 was $93.7 million, compared with $79.4 million in the same period last year. Current period cash flow was positively impacted by a reduction in inventory levels from December 31, 2013 and a favorable change in accounts payable, partially offset by higher accounts receivable. Cash flow used in investing activities, including the acquisition of CPO, totaled $41.3 million in 2014, compared with $19.3 million in the same period last year.

The company currently has approximately $1.0 billion of total committed debt capacity. As of September 30, 2014, the company had total debt outstanding of $545.9 million compared with $507.5 million as of September 30, 2013. Debt-to-total capitalization declined to 38.7 percent at September 30, 2014 from 38.9 percent at September 30, 2013. In the first nine months of 2014, the company paid $43.0 million to acquire approximately 1.1 million shares and paid cash dividends of $16.4 million to common shareholders.

Outlook
“Our third quarter results reflect the significant progress we are making as we continue to transform our business,” commented Phipps. “We will continue to build on this progress by investing in our online and industrial businesses and creating customer efficiencies to position the company for sustained growth, profitability and value creation.”

Conference Call
United Stationers will hold a conference call followed by a question and answer session on Thursday, October 23, 2014, at 10:00 a.m. CDT, to discuss third quarter 2014 results. To participate, callers within the U.S. and Canada should dial (877) 358-2531, and international callers should dial (412) 902-6623 approximately 10 minutes before the presentation. The conference ID is “10051838.” To listen to the webcast, participants should visit the Investors section of the company’s website (link: http://investors.unitedstationers.com), and click on the “Q3-14 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, this news release, a financial slide presentation and other information related to the call, also located on the Investors section of United Stationers’ website, about two hours after the call ends.

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 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 65 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.

For Further Information Contact:

Cody Phipps
President and Chief Executive Officer
or
Todd Shelton
Senior Vice President and Chief Financial Officer
United Stationers Inc.
(847) 627-7000

SOURCE United Stationers Inc.