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.

For Further Information Contact:
Cody Phipps
President and Chief Executive Officer
or
Todd Shelton
Senior Vice President and Chief Financial Officer
847-627-7000

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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