United Stationers Inc. (NASDAQ: USTR) reported first quarter 2012
results.
First Quarter Financial Summary
-
Net sales were up 2.8% to $1.3 billion in the current year quarter.
-
Diluted earnings per share were $0.36 versus $0.44 in the prior-year
quarter. Adjusted earnings per share in the first quarter of 2012 were
$0.45(1), compared with $0.47(1) in the
prior-year quarter.
-
Distribution network optimization and targeted cost reduction actions
were taken in the quarter to improve operating effectiveness and
efficiency. As a result, first quarter 2012 GAAP results included a
pre-tax $6.2 million, or $0.09 per share, charge related to facility
closures and severance costs. In addition, the prior-year quarter
included a $0.03 per share non-deductible asset impairment charge
related to an equity investment in a managed print services business.
-
First quarter gross margin was $180.9 million or 14.2% of sales,
compared with $182.4 million or 14.7% of sales in the prior-year
quarter.
-
Adjusted operating expenses were $143.1 million(1) or 11.3%(1)
of sales, compared with $140.7 million(1) or 11.4%(1)
of sales in the prior-year quarter.
-
Adjusted operating margin was $37.8 million(1) or 3.0%(1)
of sales, versus $41.6 million(1) or 3.4%(1) of
sales in the prior-year quarter.
-
Adjusted net income was $19.0 million(1), compared with
$22.1 million(1) in the prior-year quarter.
-
Net cash provided by operating activities for the quarter totaled
$27.9 million versus $41.0 million in the prior-year quarter.
-
1.1 million shares were repurchased at a cost of $33.6 million.
“Our first quarter results reflected strong momentum in our growth
businesses,” said Cody Phipps, president and chief executive officer.
“We are pleased with our progress in optimizing our distribution
operations and organization. These efforts reduce costs, utilize our
assets more effectively and allow us to better serve customers in the
near term, while positioning the company for long-term growth.”
First Quarter Performance
Diluted earnings per share for the latest quarter were $0.36, compared
with $0.44 in the prior-year period. Excluding the charges noted above,
first quarter 2012 adjusted earnings per share were $0.45(1),
compared with $0.47(1) in the prior-year period.
Sales for the first quarter of 2012 were $1.3 billion up 2.8% from the
prior-year quarter. Strong growth was seen in the industrial supplies
and janitorial/breakroom categories with sales up 21.3% and 11.9%,
respectively. The office products category was up 2.0% and furniture
growth was soft at 1.0%. These gains were partially offset by a 6.4%
decline in the technology products category.
Gross margin for the quarter was $180.9 million or 14.2% of sales,
compared with $182.4 million or 14.7% of sales in the prior-year
quarter. Gross margin declined due to a lower-margin mix, increased fuel
costs and continued competitive pricing pressures in office
products-related categories. Higher inflation during the first quarter
of 2012 partially offset these negative margin affects.
First quarter 2012 operating expenses were $149.3 million, or 11.7% of
sales. This includes a charge of $6.2 million for facility closures and
severance costs. Excluding this item, first quarter 2012 adjusted
operating expenses were $143.1 million(1) or 11.3%(1) of
sales, compared with last year’s adjusted $140.7 million(1)
or 11.4%(1) of sales. Adjusted operating expenses for 2011
exclude a $1.6 million asset impairment charge related to an equity
investment in a managed print services business. Operating expenses
reflected continued investments in the company’s strategic growth
initiatives offset by savings from “War on Waste” initiatives.
Operating income for the first quarter of 2012 was $31.6 million or 2.5%
of sales, versus $40.0 million or 3.2% of sales, in the first quarter of
2011. Excluding the charges noted above, first quarter 2012 adjusted
operating income was $37.8 million(1) or 3.0%(1)
of sales, compared with $41.6 million(1) or 3.4%(1)
of sales in the prior-year quarter.
Cash Flow, Debt Trends and Share Repurchases
Net cash provided by operating activities for the first three months of
2012 was $27.9 million. Operating cash flow benefited from lower working
capital requirements. Cash flow used in investing activities totaled
$4.4 million in the latest quarter, compared with $9.8 million in the
same period last year. Capital spending for 2012 is expected to be in
the $30-35 million range.
The company has approximately $935 million of total committed debt
capacity at March 31, 2012 and has maintained debt-to-EBITDA leverage at
the low end of targeted levels. Outstanding debt at March 31, 2012 and
2011 was $512.2 million and $441.8 million, respectively. Debt-to-total
capitalization at March 31, 2012 was 42.9%, compared with 36.5% at March
31, 2011. During the first quarter of 2012, the company paid $33.6
million to repurchase 1.1 million shares and paid $5.4 million in cash
dividends. The amount remaining under Board share repurchase
authorizations at April 20, 2012 was approximately $75 million.
“Our balance sheet, liquidity, and access to capital remains strong,”
said Phipps. “We will maintain our capital deployment approach of
prudent investments in growth and productivity, targeted acquisitions,
and returning capital to shareholders through dividends and share
repurchases.”
Outlook
“Our growth businesses will drive solid results given the momentum we
have and the investments we are making,” continued Phipps. “Weak demand
and margin pressure will continue to be factors in office products,
which we are addressing with customer, network optimization, and
efficiency initiatives. These actions reflect the commitment we have to
our “Winning from the Middle” strategy and our confidence in the
value-creating potential we have in our business.”
Conference Call
United Stationers will hold a conference call followed by a question and
answer session on Tuesday, April 24, 2012, at 10:00 a.m. CT, to discuss
first quarter 2012 results. To participate, callers within the U.S. and
Canada should dial (888) 771-4371, and international callers should dial
(847) 585-4405 approximately 10 minutes before the presentation. The
passcode is “32115329”. To listen to the webcast, participants should
visit the Investor Information section of the company’s website at ir.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’ website, 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 website.
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: 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 key customers, and the risks inherent in continuing
or increased customer concentration; United’s reliance on key suppliers
and the supplier allowances and promotional incentives they offer;
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 a
loss of, or substantial decrease in, the availability of products or
service from key vendors at competitive prices; United’s ability to
maintain its existing information technology systems and the systems and
eCommerce 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 wholesale distributor of business
products, with 2011 net sales of $5.0 billion. The company stocks a
broad and deep line of approximately 100,000 items on a national basis,
including technology products, traditional office products, janitorial
and breakroom supplies, office furniture, and industrial supplies. A
network currently comprised of 62 distribution centers allows it to
deliver these products to over 25,000 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.
-tables follow-
|
|
|
United Stationers Inc. and Subsidiaries
|
|
Condensed Consolidated Statements of Income
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
1,271,647
|
|
|
$
|
1,237,453
|
|
Cost of goods sold
|
|
|
|
|
1,090,718
|
|
|
|
1,055,081
|
|
Gross profit
|
|
|
|
|
180,929
|
|
|
|
182,372
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
Warehousing, marketing and administrative charges
|
|
|
|
|
149,337
|
|
|
|
142,361
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
|
31,592
|
|
|
|
40,011
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
|
|
7,166
|
|
|
|
6,521
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
|
|
- -
|
|
|
|
210
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
|
|
24,426
|
|
|
|
33,280
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
|
|
9,314
|
|
|
|
12,833
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
15,112
|
|
|
$
|
20,447
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - diluted
|
|
|
|
$
|
0.36
|
|
|
$
|
0.44
|
|
Weighted average number of common shares − diluted
|
|
|
|
|
42,420
|
|
|
|
46,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Stationers Inc. and Subsidiaries
|
|
Condensed Consolidated Balance Sheets
|
|
(dollars in thousands, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
As of
|
|
|
|
|
2012
|
|
2011
|
|
Dec. 31, 2011
|
|
ASSETS
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
11,198
|
|
|
$
|
39,521
|
|
|
|
11,783
|
|
|
Accounts receivable, net
|
|
|
|
642,028
|
|
|
|
648,099
|
|
|
|
659,215
|
|
|
Inventories
|
|
|
|
672,274
|
|
|
|
636,250
|
|
|
|
741,507
|
|
|
Other current assets
|
|
|
|
31,109
|
|
|
|
30,869
|
|
|
|
48,093
|
|
|
Total current assets
|
|
|
|
1,356,609
|
|
|
|
1,354,739
|
|
|
|
1,460,598
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
126,931
|
|
|
|
130,878
|
|
|
|
129,438
|
|
|
Intangible assets, net
|
|
|
|
55,020
|
|
|
|
60,134
|
|
|
|
56,285
|
|
|
Goodwill
|
|
|
|
328,061
|
|
|
|
328,061
|
|
|
|
328,061
|
|
|
Other long-term assets
|
|
|
|
21,653
|
|
|
|
17,755
|
|
|
|
20,500
|
|
|
Total assets
|
|
|
$
|
1,888,274
|
|
|
$
|
1,891,567
|
|
|
|
1,994,882
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
433,725
|
|
|
$
|
422,449
|
|
|
|
499,265
|
|
|
Accrued liabilities
|
|
|
|
173,059
|
|
|
|
161,151
|
|
|
|
193,572
|
|
|
Short-term debt
|
|
|
|
50,000
|
|
|
|
6,800
|
|
|
|
- -
|
|
|
Total current liabilities
|
|
|
|
656,784
|
|
|
|
590,400
|
|
|
|
692,837
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
|
14,975
|
|
|
|
14,522
|
|
|
|
14,750
|
|
|
Long-term debt
|
|
|
|
462,150
|
|
|
|
435,000
|
|
|
|
496,757
|
|
|
Other long-term liabilities
|
|
|
|
71,750
|
|
|
|
81,901
|
|
|
|
85,859
|
|
|
Total liabilities
|
|
|
|
1,205,659
|
|
|
|
1,121,823
|
|
|
|
1,290,203
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.10 par value; authorized − 100,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares, issued − 74,435,628 shares in 2012 and 2011
|
|
|
|
7,444
|
|
|
|
7,444
|
|
|
|
7,444
|
|
|
Additional paid-in capital
|
|
|
|
405,588
|
|
|
|
403,591
|
|
|
|
409,190
|
|
|
Treasury stock, at cost – 33,323,963 and 28,402,626
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
shares at March 31, 2012 and 2011, respectively and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,281,847 shares at December 31, 2011
|
|
|
|
(940,564
|
)
|
|
|
(782,621
|
)
|
|
|
(908,667
|
)
|
|
Retained earnings
|
|
|
|
1,262,791
|
|
|
|
1,181,523
|
|
|
|
1,253,118
|
|
|
Accumulated other comprehensive loss
|
|
|
|
(52,644
|
)
|
|
|
(40,193
|
)
|
|
|
(56,406
|
)
|
|
Total stockholders' equity
|
|
|
|
682,615
|
|
|
|
769,744
|
|
|
|
704,679
|
|
|
Total liabilities and stockholders' equity
|
|
|
$
|
1,888,274
|
|
|
$
|
1,891,567
|
|
|
$
|
1,994,882
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Stationers Inc. and Subsidiaries
|
|
Consolidated Statements of Cash Flows
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended
March 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
15,112
|
|
|
|
$
|
20,447
|
|
|
Adjustments to reconcile net income to net cash provided by
|
|
|
|
|
|
|
|
operating activities:
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
8,607
|
|
|
|
|
8,840
|
|
|
Share-based compensation
|
|
|
|
1,926
|
|
|
|
|
3,707
|
|
|
Gain on the disposition of plant, property and equipment
|
|
|
|
(49
|
)
|
|
|
|
- -
|
|
|
Impairment of equity investment
|
|
|
|
- -
|
|
|
|
|
1,635
|
|
|
Amortization of capitalized financing costs
|
|
|
|
241
|
|
|
|
|
194
|
|
|
Excess tax benefits related to share-based compensation
|
|
|
|
(464
|
)
|
|
|
|
(2,095
|
)
|
|
Deferred income taxes
|
|
|
|
(1,944
|
)
|
|
|
|
(1,329
|
)
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
Decrease (increase) in accounts receivable, net
|
|
|
|
17,640
|
|
|
|
|
(19,772
|
)
|
|
Decrease in inventory
|
|
|
|
69,959
|
|
|
|
|
48,178
|
|
|
Decrease (increase) in other assets
|
|
|
|
15,681
|
|
|
|
|
(680
|
)
|
|
(Decrease) increase in accounts payable
|
|
|
|
(63,520
|
)
|
|
|
|
49,660
|
|
|
Decrease in checks in-transit
|
|
|
|
(1,758
|
)
|
|
|
|
(48,672
|
)
|
|
Decrease in accrued liabilities
|
|
|
|
(19,427
|
)
|
|
|
|
(19,530
|
)
|
|
(Decrease) increase in other liabilities
|
|
|
|
(14,108
|
)
|
|
|
|
458
|
|
|
Net cash provided by operating activities
|
|
|
|
27,896
|
|
|
|
|
41,041
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
(4,479
|
)
|
|
|
|
(9,819
|
)
|
|
Proceeds from the disposition of property, plant and equipment
|
|
|
|
84
|
|
|
|
|
- -
|
|
|
Net cash used in investing activities
|
|
|
|
(4,395
|
)
|
|
|
|
(9,819
|
)
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
Net borrowings under debt arrangements
|
|
|
|
15,393
|
|
|
|
|
- -
|
|
|
Net (disbursements) proceeds from share-based compensation
arrangements
|
|
|
|
(942
|
)
|
|
|
|
9,615
|
|
|
Acquisition of treasury stock, at cost
|
|
|
|
(33,575
|
)
|
|
|
|
(24,611
|
)
|
|
Payment of cash dividends
|
|
|
|
(5,436
|
)
|
|
|
|
- -
|
|
|
Excess tax benefits related to share-based compensation
|
|
|
|
464
|
|
|
|
|
2,095
|
|
|
Payment of debt issuance costs
|
|
|
|
- -
|
|
|
|
|
(111
|
)
|
|
Net cash used in by financing activities
|
|
|
|
(24,096
|
)
|
|
|
|
(13,012
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
|
10
|
|
|
|
|
10
|
|
|
Net change in cash and cash equivalents
|
|
|
|
(585
|
)
|
|
|
|
18,220
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
11,783
|
|
|
|
|
21,301
|
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
11,198
|
|
|
|
$
|
39,521
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United Stationers Inc. and Subsidiaries
|
|
Reconciliation of Non-GAAP Financial Measures
|
|
Adjusted Operating Income, Net Income, and Diluted Earnings Per
Share
|
|
(in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
|
|
|
2012
|
|
|
|
2011
|
|
|
|
|
|
|
Amount
|
|
|
% to
Net Sales
|
|
|
|
Amount
|
|
|
% to
Net Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
$
|
1,271,647
|
|
|
100.00
|
%
|
|
|
$
|
1,237,453
|
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
$
|
180,929
|
|
|
14.23
|
%
|
|
|
$
|
182,372
|
|
|
14.74
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
$
|
149,337
|
|
|
11.74
|
%
|
|
|
$
|
142,361
|
|
|
11.50
|
%
|
|
Facility closures and severance charge
|
|
|
|
(6,247
|
)
|
|
(0.49
|
)%
|
|
|
- -
|
|
|
- -
|
|
|
Asset impairment charge
|
|
|
|
- -
|
|
|
- -
|
|
|
|
(1,635
|
)
|
|
(0.13
|
)%
|
|
Adjusted operating expenses
|
|
|
|
$
|
143,090
|
|
|
11.25
|
%
|
|
|
$
|
140,726
|
|
|
11.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
$
|
31,592
|
|
|
2.49
|
%
|
|
|
$
|
40,011
|
|
|
3.24
|
%
|
|
Operating expense items noted above
|
|
|
|
6,247
|
|
|
0.49
|
|
|
|
1,635
|
|
|
0.13
|
|
|
Adjusted operating income
|
|
|
|
$
|
37,839
|
|
|
2.98
|
%
|
|
|
$
|
41,646
|
|
|
3.37
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
$
|
15,112
|
|
|
|
|
|
|
$
|
20,447
|
|
|
|
|
|
Operating expense items noted above
|
|
|
|
3,873
|
|
|
|
|
|
|
1,635
|
|
|
|
|
|
Adjusted net income
|
|
|
|
$
|
18,985
|
|
|
|
|
|
|
$
|
22,082
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
$
|
0.36
|
|
|
|
|
|
|
$
|
0.44
|
|
|
|
|
|
Per share operating expense items noted above
|
|
|
|
0.09
|
|
|
|
|
|
|
0.03
|
|
|
|
|
|
Adjusted diluted earnings per share
|
|
|
|
$
|
0.45
|
|
|
|
|
|
|
$
|
0.47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares — diluted
|
|
|
|
42,420
|
|
|
|
|
|
|
46,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: Adjusted Operating Expenses, Operating Income, Net Income and
Earnings Per Share in the first quarter of 2012 exclude the effects of a
$6.2 million charge related facility closures and severance cost. In the
first quarter of 2011, Adjusted Operating Expenses, Operating Income,
Net Income and Earnings Per Share exclude the effects of a
non-deductible asset impairment charge of $1.6 million. 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 these items to its
Condensed Consolidated Statements of Income reported in accordance with
Generally Accepted Accounting Principles.
