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United Stationers Reports Third Quarter 2012 Earnings

            United Stationers Reports Third Quarter 2012 Earnings

PR Newswire

DEERFIELD, Ill., Oct. 22, 2012

DEERFIELD, Ill., Oct. 22, 2012 /PRNewswire/ -- United Stationers Inc. (NASDAQ:
USTR), a leading North American wholesale distributor of business products,
today reported third quarter 2012 earnings per share up 12% and operating cash
flow of $107 million on relatively flat sales.

Third Quarter 2012 Financial Highlights

  oNet sales in the third quarter were $1.3 billion, flat compared with the
    prior-year quarter, after adjusting for one less selling day in the third
    quarter of 2012.
  oDiluted earnings per share were $0.91, compared with $0.81 in the
    prior-year quarter.
  oNet cash provided by operating activities in the third quarter of 2012
    totaled $107.4 million, compared with $26.2 million in the prior-year
    quarter. 
  oGross margin in the third quarter of 2012 was up $4.0 million to $203.8
    million, or 15.8% of sales, compared with $199.8 million, or 15.3% of
    sales, in last year's third quarter.
  oOperating expenses in the quarter were $140.1 million, or 10.9% of sales,
    compared with $135.1 million, or 10.3% of sales in the prior-year
    quarter.
  oOperating income in the quarter was $63.6 million, or 4.9% of sales,
    compared with $64.6 million, or 4.9% of sales, in the year-ago quarter.
  oNet income was $36.8 million in 2012, compared with $35.8 million in the
    year-ago quarter.
  oNet cash provided by operating activities for the nine months ended
    September 30, 2012, totaled $155.7 million versus $99.5 million last
    year.
  oCash paid for share repurchases for the nine months ended September 30,
    2012, totaled $67.5 million for 2.4 million shares. On October 17, 2012,
    the board of directors approved a $0.14 per share cash dividend, an
    increase of 8%, to shareholders of record on December 14, 2012 and payable
    on January 15, 2013.

"Our third quarter results reflect solid progress on our
'Winning-from-the-Middle' strategy," said Cody Phipps president and chief
executive officer. "We drove strong EPS growth, solid cash generation and
gross margin expansion.The acquisition of O.K.I. Supply extends our
industrial platform in several highly complementary categories and creates
compelling growth opportunities and operating efficiencies. In addition, we
continued to drive organic growth in industrial and janitorial & breakroom and
from our online and public sector initiatives while supporting our core
independent and national accounts customers as they reposition themselves in a
rapidly evolving marketplace."

Third Quarter Performance

Sales per selling day in the third quarter of 2012 were flat, compared with
last year. Sales growth in the industrial supplies and janitorial/breakroom
categories were 7.0% and 2.3%, respectively, from last year. Office products
showed improvement with 1.3% growth while technology and furniture category
sales were down 4.5% and 2.9%, respectively, versus the prior year.

Gross margin in the third quarter of 2012, was up $4.0 million to $203.8
million, compared with $199.8 million for the same quarter a year ago. Gross
margin as a percent of sales increased 56 bps to 15.8%, compared with the
prior-year quarter. Gross margin was positively affected by lower cost of
goods sold primarily driven by inventory purchase-related supplier allowances
and lower advertising costs as well as ongoing War on Waste (WOW)
initiatives. These improvements more than offset ongoing competitive pricing
pressures.

Operating expenses for the latest quarter were $140.1 million or 10.9% of
sales, compared with $135.1 million or 10.3% of sales in the same period last
year. Operating expenses in the third quarter 2012 were affected by higher
pension, health care, labor, and variable management compensation costs,
partially offset by continued success with WOW efforts. In addition, the
prior-year quarter included a favorable resolution of a non-income based tax
liability.

Operating income for the latest quarter was $63.6 million or 4.9% of sales,
compared with $64.6 million or 4.9% of sales in the same quarter last year.

Diluted earnings per share for the 2012 quarter were $0.91, compared with
$0.81 in the year-ago quarter. Reduced interest expense, resulting from the
expiration of higher fixed interest rate swap contracts, and ongoing stock
repurchases, which lowered average shares outstanding, both benefited earnings
per share.

Nine-Month Performance

Sales in the first nine months of 2012 were $3.8 billion, up 1.4%, after
adjusting for one less selling day in 2012. This increase was due to growth
in industrial supplies and janitorial/breakroom of 13.4% and 6.5%,
respectively. Office products were near 1% growth while technology declined
4.5% and furniture declined 0.7%.

Gross margin for the first nine months of 2012 increased to $572.9 million or
14.9% of sales, compared with $566.4 million or 14.9% of sales in the same
prior-year period. Gross margin was impacted by competitive pricing pressures
that were offset by higher inventory purchase-related supplier allowances,
increased advertising margins, and continued success from WOW initiatives.

Operating expenses in 2012 were $427.4 million or 11.1% of sales, including a
charge of $6.2 million for facility closures and severance costs, compared
with $413.9 million, or 10.9% of sales, last year, which included a non-cash
$4.4 million equity compensation charge as well as a $1.6 million
non-deductible, asset impairment charge with respect to the company's equity
investment in a managed print services business. Excluding these items,
operating expenses in 2012 were $421.1 million^(1) or 11.0%^(1) of sales,
compared with the prior year of $407.9 million^(1) or 10.7%^(1) of sales.
Increased operating expenses in 2012 reflect higher pension, labor, and
healthcare costs, partially offset by lower bad debt and continued WOW
initiatives. In addition, the prior year included a favorable resolution of a
non-income based tax liability.

Operating income for the first nine months of 2012 was $145.6 million or 3.8%
of sales, compared with $152.4 million, or 4.0% of sales in the prior-year
period. Excluding the items mentioned above, operating income in 2012 was
$151.8 million^(1) or 4.0%^(1) of sales, compared with $158.5 million^(1) or
4.2%^(1) of sales in the prior year.

Diluted earnings per share for the first nine months of 2012 were $1.91 versus
$1.77 in the same period last year. Excluding the items mentioned above,
diluted earnings per share for the first nine months of 2012 rose 7.5% to
$2.01^(1), compared with $1.87^(1) in the prior-year period.

Cash Flow, Debt Trends and Share Repurchases

Net cash provided by operating activities totaled $155.7 million for the
latest nine-month period versus cash provided of $99.5 million a year ago.
Through the six months ended June 30, 2012, net cash provided by operating
activities was $48.3 million. The resulting $107.4 million in operating cash
flows in the current year quarter were positively affected by lower working
capital requirements, primarily from successful inventory management. Cash
flow used in investing activities for the nine months ended September 30, 2012
totaled $20.1 million, down from $20.7 million in the prior-year period.
Capital spending through the nine months ended September 30, 2012 was $20.3
million and is expected to be in the range of $30 million to $35 million for
2012.

The company has total committed funding sources of approximately $985
million. As of September 30, 2012, the company had total debt outstanding of
$455.0 million, compared with $489.7 million as of September 30, 2011. As of
September 30, 2012 and 2011, debt-to-total capitalization was 39.0% and 40.4%,
respectively. Through the first nine months of 2012, the company repurchased
2.4 million shares for $67.5 million, and paid $16.1 million in dividends to
shareholders.

"Our balance sheet, liquidity and cash flows remain strong," said Phipps. "We
have ample financial flexibility to make acquisitions like O.K.I. Supply,
which enhance our growth platforms and provide a compelling return on our
investment as well as support our diversification strategy. We are also
pleased to be able to continue to return capital to investors including the
increase in our dividend that was announced last week."

Outlook

"We remain committed to our strategy and see attractive opportunities to
profitably grow our business," said Phipps. "In this rapidly evolving market,
supporting our customers and supplier partners with a variety of solutions to
help them succeed is more important than ever.  That is why we continue to
focus on initiatives that bring value to our customers while we drive the
efficiency improvements that allow reinvestment in the business."

Conference Call

United Stationers will hold a conference call followed by a question and
answer session on Tuesday, October 23, 2012, at 10:00 a.m. CDT, to discuss
third 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 confirmation
number is "33239541." 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 inthis releasein 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 60 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
(unaudited)
(in thousands, except per share data)
               For the Three Months Ended          For the Nine Months Ended
               September 30,                         September 30,
                         2012         2011          2012         2011
Net sales                $ 1,288,675  $ 1,310,029   $ 3,836,032  $ 3,804,110
Cost of goods sold         1,084,917    1,110,278     3,263,086    3,237,748
Gross profit               203,758      199,751       572,946      566,362
Operating expenses:
 Warehousing,
marketing and              140,117      135,117       427,389      413,917
 administrative
expenses
Operating income           63,641       64,634        145,557      152,445
Interest expense           4,708        6,972         18,944       20,094
Other expense              -            100           -            410
Income before income       58,933       57,562        126,613      131,941
taxes
Income tax expense         22,169       21,783        47,708       50,879
Net income               $ 36,764     $ 35,779      $ 78,905     $ 81,062
Net income per share -   $ 0.91       $ 0.81        $ 1.91       $ 1.77
diluted


Weighted average number    40,530       44,202        41,229       45,718
of
 common shares −
diluted





United Stationers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
                                                                  (audited)
                                        (unaudited)               As of
                                        As of September 30,       December 31,
                                        2012         2011         2011
ASSETS
 Current assets:
 Cash and cash equivalents           $ 21,147     $ 10,489     $ 11,783
 Accounts receivable, net              669,014      699,174      659,215
 Inventories                           643,597      615,506      741,507
 Other current assets                  29,679       26,839       48,093
 Total current assets           1,363,437    1,352,008    1,460,598
 Property, plant and equipment, net      127,227      127,078      129,438
 Goodwill                                328,061      328,061      328,061
 Intangible assets                       52,492       57,573       56,285
 Other long-term assets                  20,549       20,392       20,500
 Total assets                 $ 1,891,766  $ 1,885,112  $ 1,994,882
LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities:
 Accounts payable                    $ 443,022    $ 410,811    $ 499,265
 Accrued liabilities                   192,287      174,325      193,572
 Short-term debt                       110,000      6,800        -
 Total current liabilities      745,309      591,936      692,837
 Deferred income taxes                   15,696       21,059       14,750
 Long-term debt                          345,036      482,923      496,757
 Other long-term liabilities             74,946       68,035       85,859
 Total liabilities              1,180,987    1,163,953    1,290,203
 Stockholders' equity:
 Common stock, $0.10 par value;                                  
authorized − 100,000,000 shares,         7,444        7,444
issued –74,435,628 shares in 2012 and                               7,444
2011
 Additional paid-in capital            400,678      413,173      409,190
 Treasury stock, at cost –                                        
34,137,367 and 31,834,490 shares at
September 30, 2012 and 2011,             (963,471)    (891,545)     
respectively, and32,281,847 shares at
December 31, 2011                                                    (908,667)
 Retained earnings                     1,316,112    1,230,656     1,253,118
 Accumulated other comprehensive       (49,984)     (38,569)      (56,406)
loss
 Total stockholders' equity              710,779      721,159       704,679
 Total liabilities and            $ 1,891,766  $ 1,885,112  $  1,994,882
stockholders' equity



United Stationers Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited) (in thousands)
                                                    For the Nine Months Ended

                                                    September 30,
                                                    2012          2011
Cash Flows From Operating Activities:
 Net income                                     $ 78,905      $ 81,062
 Adjustments to reconcile net income to net
cash provided by
 operating activities:
 Depreciation and amortization                    26,216        25,822
 Share-based compensation                         5,243         13,072
 Loss on the disposition of plant, property and   60            28
equipment
 Impairment of equity investment                  --            1,635
 Amortization of capitalized financing costs      749           728
 Excess tax benefits related to share-based       (411)         (3,397)
compensation
 Deferred income taxes                            (4,135)       4,387
Changes in operating assets and liabilities:
 Increase in accounts receivable, net         (9,342)       (71,662)
 Decrease in inventory                        98,605        67,747
 Decrease in other assets                     17,822        2,879
 (Decrease) increase in accounts payable      (46,880)      12,135
 Decrease in checks in-transit                (9,093)       (23,232)
 Increase (decrease) in accrued liabilities   3,973         (5,346)
 Decrease in other liabilities                (6,008)       (6,369)
 Net cash provided by operating           155,704       99,489
activities
Cash Flows From Investing Activities:
 Capital expenditures                             (20,322)      (20,786)
Proceeds from the disposition of property, plant      195           62
and equipment
 Net cash used in investing activities    (20,127)      (20,724)
Cash Flows From Financing Activities:
 Net (repayments) borrowings under debt           (41,721)      77,923
arrangements
 Repayment of debt                                --            (370,000)
 Proceeds from the issuance of debt               --            340,000
 Net (disbursements) proceeds from share-based
compensation                                          (1,162)       11,486

 arrangements
 Acquisition of treasury stock, at cost           (67,507)      (137,669)
Payment of cash dividends                             (16,101)      (11,955)
 Excess tax benefits related to share-based       411           3,397
compensation
 Payment of debt fees and other                   (138)         (2,727)
 Net cash used in financing activities    (126,218)     (89,545
 Effect of exchange rate changes on cash and      5             (32)
cash equivalents
 Net change in cash and cash equivalents          9,364         (10,812)
 Cash and cash equivalents, beginning of period   11,783        21,301
 Cash and cash equivalents, end of period       $ 21,147      $ 10,489



United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Operating Income, Net Income and Diluted Earnings Per Share
(unaudited)
(in thousands, except per share data)
                            FortheNineMonthsEndedSeptember 30,
                            2012                      2011
                            Amount        %to        Amount       %to
                                          NetSales                NetSales
Net sales                   $ 3,836,032   100.00    % $ 3,804,110  100.00    %
Gross profit                $ 572,946     14.94     % $ 566,362    14.89     %
Operating expenses          $ 427,389     11.14     % $ 413,917    10.88     %
 Facility closures and    (6,247)       (0.16)    % --           --
severance charge
 Equity compensation –    --            --          (4,409)      (0.12)    %
CEO transition
 Asset impairment           --          --            (1,635)    (0.04)    %
charge
Adjusted operating          $ 421,142     10.98     % $ 407,873    10.72     %
expenses
Operating income            $ 145,557     3.80      % $ 152,445    4.01      %
Operating expense item      6,247         0.16      % 6,044        0.16      %
noted above
Adjusted operating income   $ 151,804     3.96      % $ 158,489    4.17      %
Net income                  $ 78,905                  $ 81,062
Operating expense item      3,873                     4,367
noted above, net tax
Adjusted net income         $ 82,778                  $ 85,429
Diluted earnings per share  $ 1.91                    $ 1.77
Per share operating         0.10                      0.10
expense item noted above
Adjusted diluted earnings   $ 2.01                    $ 1.87
per share
Adjusted diluted earnings
per share — growth rate     7.5         %
over the prior year period
Weighted average number of  41,229                    45,718
common shares — diluted

Note: Adjusted Operating Expenses, Operating Income, Net Income and Earnings
Per Share for the nine months ended September 30, 2012, exclude the effects of
a $6.2 million charge related to facility closures and severance cost. In
addition, the results for the nine months ended September 30, 2011, were
adjusted to exclude the effects of an equity compensation charge related to a
transition agreement with the former chief executive officer and a
non-deductible asset impairment charge. Generally Accepted Accounting
Principles require that the effects of this item be included in the Condensed
Consolidated Statements of Income. Management believes that excluding these
items results in an appropriate comparison of the Company's ongoing operating
results. It is helpful to provide readers of the financial statements with a
reconciliation of these items to the Condensed Consolidated Statements of
Income reported in accordance with Generally Accepted Accounting Principles.

For Further Information Contact:

Cody Phipps
President and Chief Executive Officer
or
Fareed A. Khan
Sr. Vice President and Chief Financial Officer
United Stationers Inc.
(847) 627-7000

SOURCE United Stationers Inc.

Website: http://www.unitedstationers.com