Securities and Exchange Commission
Washington, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For The Quarterly Period Ended: February 28, 1994
Commission File Number: 0-10653
UNITED STATIONERS INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3141189
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 East Golf Road, Des Plaines, Illinois 60016-1267
(Address of principal executive offices) (Zip Code)
(708) 699-5000
(Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(1) Yes X No
(2) Yes X No
As of March 31, 1994, United Stationers Inc. had 18,588,154 shares of
common stock, $.10 par value, outstanding.
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of
February 28, 1994 and August 31, 1993. 3
Condensed Consolidated Statements of Income
for the Three Months Ended February 28, 1994
and February 28, 1993 and the Six Months Ended
February 28, 1994 and February 28, 1993. 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended February 28, 1994 and
February 28, 1993. 6
Notes to Condensed Consolidated Financial Statements. 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 8
PART II - OTHER INFORMATION 11
SIGNATURES 13
INDEX TO EXHIBITS 14
-2-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
ASSETS
(Unaudited) (Audited)
February 28, August 31,
1994 1993
CURRENT ASSETS
Cash and cash equivalents $ 8,942 $ 7,889
Accounts receivable, net 153,243 162,844
Inventories 264,447 229,760
Prepaid expenses 17,232 16,426
Total Current Assets $443,864 $416,919
PROPERTY, PLANT AND EQUIPMENT, at cost $237,519 $234,818
Less-Accumulated depreciation and amortization (105,508) (97,182)
Net Property, Plant and Equipment $132,011 $137,636
GOODWILL, NET $ 42,927 $ 43,484
OTHER ASSETS, NET $ 11,313 $ 11,195
TOTAL ASSETS $630,115 $609,234
LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
Short-term debt and current maturities
of long-term obligations $ 4,726 $ 3,448
Accounts payable 116,364 150,374
Accrued liabilities 35,466 47,023
Total Current Liabilities $156,556 $200,845
DEFERRED INCOME TAXES $ 15,783 $ 14,484
LONG-TERM OBLIGATIONS $213,945 $156,208
STOCKHOLDERS' INVESTMENT $243,831 $237,697
TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT $630,115 $609,234
The accompanying notes to condensed consolidated financial
statements are an integral part of these balance sheets.
-3-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except share data)
(Unaudited)
FOR THE THREE MONTHS ENDED
February 28, February 28,
1994 1993
NET SALES $369,988 $378,818
COST OF SALES 287,428 292,009
Gross profit on sales $ 82,560 $ 86,809
WAREHOUSING, MARKETING AND
ADMINISTRATIVE EXPENSES 73,338 74,800
Income from operations $ 9,222 $ 12,009
OTHER EXPENSE, net 2,738 2,343
Income before income taxes $ 6,484 $ 9,666
INCOME TAXES 2,640 4,093
NET INCOME $ 3,844 $ 5,573
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,587,082 18,555,082
NET INCOME PER COMMON SHARE $ .21 $ .30
CASH DIVIDENDS PAID PER COMMON SHARE $ .10 $ .10
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-4-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands of dollars, except share data)
(Unaudited)
FOR THE SIX MONTHS ENDED
February 28, February 28,
1994 1993
NET SALES $740,585 $744,139
COST OF SALES 573,251 575,506
Gross profit on sales $167,334 $168,633
WAREHOUSING, MARKETING AND
ADMINISTRATIVE EXPENSES $145,739 $146,041
Income from operations $ 21,595 $ 22,592
OTHER EXPENSE, net 4,898 4,016
Income before income taxes $ 16,697 $ 18,576
INCOME TAXES 6,929 7,892
NET INCOME $ 9,768 $ 10,684
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 18,584,999 18,547,061
NET INCOME PER COMMON SHARE $ .53 $ .58
CASH DIVIDENDS PAID PER COMMON SHARE $ .20 $ .20
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-5-
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
FOR THE SIX MONTHS ENDED
February 28, February 28,
1994 1993
Cash Flows from Operating Activities
Net Income $ 9,768 $ 10,684
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 10,286 10,359
Increase in deferred income taxes 1,299 20
Decrease in accounts payable (34,010) (6,042)
Decrease in accrued liabilities (12,457) (5,034)
Decrease/(increase) in accounts receivable 9,601 (25,573)
Increase in inventories (34,687) (22,184)
(Increase)/decrease in prepaid expenses (806) 497
Increase in other assets (1,032) (955)
Net Cash Used in Operating Activities $(52,038) $(38,228)
Cash Flows from Investing Activities
Acquisition of property, plant and equipment $ (4,007) $(15,287)
Disposition of property, plant and equipment 695 89
Net Cash Used in Investing Activities $ (3,312) $(15,198)
Cash Flows from Financing Activities
Decrease in short-term debt $ 0 $ (678)
Payments on long-term obligations (292) (291)
Additions to long-term obligations 60,329 53,000
Issuance of common shares 24 453
Payment of dividends (3,773) (3,718)
Disposition of treasury stock 115 31
Net Cash Provided by Financing Activities $ 56,403 $ 48,797
Net increase/(decrease) in cash and
cash equivalents $ 1,053 $ (4,629)
Cash and cash equivalents at the beginning
of the period 7,889 11,942
Cash and Cash Equivalents at the End
of the Period $ 8,942 $ 7,313
_______________________________________________________________________
Income taxes paid $ 5,975 $ 9,820
Interest paid $ 5,074 $ 4,250
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-6-
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited,
except for the Balance Sheet as of August 31, 1993, which is condensed from the
audited Balance Sheet at that date. These statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission. These statements should be read in conjunction with the Company's
audited consolidated financial statements for the year ended August 31, 1993,
and the notes therein included in its report on Form 10-K for the same period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. In the
opinion of the Company's management, the condensed consolidated financial
statements for the unaudited interim periods presented include all adjustments
necessary to fairly present the results of such interim periods and the
financial position as of the end of said periods.
(2) Review
Arthur Andersen & Co., independent public accountants, have performed a review
of the condensed consolidated financial statements referred to above. Since
they did not perform an audit, they express no opinion on these statements.
Refer to the Report of Independent Public Accountants included in this filing.
-7-
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1994 COMPARED TO FISCAL 1993
Six Month Results
Net sales were $740.6 million for the first half of Fiscal 1994, a 0.5%
decrease from net sales of $744.1 million in the comparable period a year ago.
Gross profit as a percent of net sales was 22.6% in the first half of Fiscal
1994 and in the first half of Fiscal 1993.
Operating expenses were down slightly, although they increased as a percent of
net sales to 19.7% in the first half of Fiscal 1994 compared with 19.6% in the
first half of Fiscal 1993 reflecting lower-than-anticipated sales volume.
Income from operations as a percent of net sales decreased to 2.9% in the first
half of Fiscal 1994 from 3.0% in the first half of Fiscal 1993.
Income before income taxes as a percent of net sales was 2.3% in the first half
of Fiscal 1994 compared with 2.5% in the first half of Fiscal 1993. Net income
was $9.8 million in the first half of Fiscal 1994, down 8.6% from the $10.7
million in the first half of Fiscal 1993. Net income per share was $.53 in the
first half of Fiscal 1994, compared with $.58 for the first half of Fiscal
1993.
-8-
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS (CONTINUED)
Second Quarter Results
Net sales were $370.0 million for the second quarter of Fiscal 1994, a 2.3%
decrease from net sales of $378.8 million in the comparable quarter a year ago.
The sales decline reflects three factors. First severe weather-related
conditions affected sales growth rates, particularly in the Northeast and
Midwest. In addition, past service disruptions related to the consolidation of
the Company's West Coast facilities resulted in a temporary loss of market
share. Finally, as planned, the Company reduced its merger-related
stockkeeping units from 37,000 to its pre-merger level of 25,000 items,
resulting in some lost sales.
Gross profit as a percent of net sales decreased to 22.3% in the second quarter
of Fiscal 1994 from 22.9% in the second quarter of Fiscal 1993, primarily
reflecting a higher level of rebates and allowances earned by the Company's
customers.
Operating expense dollars decreased, however operating expenses as a percent of
net sales increased to 19.8% in the second quarter of Fiscal 1994 from 19.7% in
the second quarter of Fiscal 1993. The increase is primarily the result of
lower-than-anticipated sales volume.
Income from operations as a percent of net sales decreased to 2.5% in the
second quarter of Fiscal 1994 from 3.2% in the second quarter of Fiscal 1993.
Income before income taxes as a percent of net sales was 1.8% in the second
quarter of Fiscal 1994 compared with the prior year's quarter of 2.6%. Net
income was $3.8 million in the second quarter of Fiscal 1994, down 31.0% from
the $5.6 million in the year-ago quarter. Net income per share was $.21 in the
second quarter of Fiscal 1994, compared with $.30 for the second quarter of
Fiscal 1993 on 18,587,082 and 18,555,082 weighted average shares outstanding,
respectively.
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UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Liquidity and Capital Resources
During the first six months of Fiscal 1994, funds to support the Company's
working capital and capital expenditure requirements were generated from
borrowings under the Company's Reducing Revolving Credit and Term Loan
Agreement (the "Agreement") and operating activities.
The Company negotiated (under the Agreement) a temporary increase in available
credit of $20 million from December 1, 1993 until May 31, 1994. This
additional availability is needed to support increased inventory levels for the
Company's peak selling season. The Company is in the process of determining
new inventory demand patterns for each of its distribution centers. Each
distribution center will carry an inventory of products closely tailored to the
needs of the local industries served by the Company's customers. While new
demand patterns are being developed, additional inventory is being carried to
ensure the Company's ability to fulfill its customers' orders.
As of February 28, 1994, the Company had $144.0 million of borrowings
outstanding under the Agreement. The Agreement, as amended, consists of a
$150.0 million revolving credit facility ("Revolver") and a $30.0 million term
loan ("Term Loan"). The Company believes current working capital, cash flow
from operations and available lines of credit will be adequate to meet
financing requirements in the foreseeable future.
The Revolver provides for revolving credit loans up to the amount of the
commitment until August 31, 1997. The commitment decreases quarterly beginning
in May 1994, by certain amounts as specified in the Agreement, to $83.6 million
as of May 31, 1997. Under the terms of the Agreement, the Company is required
to pay a facility fee of 3/16 of 1% of the total available Revolver. The Term
Loan matures on September 30, 1995 (or earlier upon certain subsequent
offerings by the Company of debt or equity). Interest on both loans is payable
at varying rates provided for in the Agreement.
The Agreement contains certain financial covenants covering the Company and its
subsidiaries on a consolidated basis, including, without limitation, covenants
relating to the consolidated current ratio, tangible net worth, capitalization,
fixed charge coverage, capital expenditures and payment of dividends by the
Company.
During the first six months of Fiscal 1994, capital expenditures totaled
approximately $4.0 million. The Company anticipates capital expenditure
requirements of approximately $15.0 million for Fiscal 1994. Capital
expenditures will be financed from existing loan agreements and operating
activities.
-10-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of United Stationers Inc.
held on January 12, 1994, the following matters were voted on:
1) Election of Directors
Each of the following members of the Board of Directors was
elected for the term listed below:
Class I Directors - term expiring in January 1997:
- Douglas K. Chapman
- Melvin L. Hecktman
- Jeffrey K. Hewson
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UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Number
2 Not applicable
4 Not applicable
10 Not applicable
11 Not applicable
15 Letter regarding unaudited interim
financial information
18 Not applicable
19 Not applicable
22 Not applicable
23 Consent of Experts and Counsel
24 Not applicable
27 Not applicable
99 Not applicable
(b) There were no reports on Form 8-K filed during the quarter
ended February 28, 1994.
-12-
UNITED STATIONERS INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATIONERS INC.
(Registrant)
Date: April 6, 1994 Joel D. Spungin
Joel D. Spungin
Chairman of the Board and
Chief Executive Officer
Jeffrey K. Hewson
Jeffrey K. Hewson
President and Chief Operating Officer
Allen B. Kravis
Allen B. Kravis
Senior Vice President and
Chief Financial Officer
Ted S. Rzeszuto
Ted S. Rzeszuto
Vice President and Controller
Report on Form 10-Q for the quarter ended February 28, 1994.
-13-
UNITED STATIONERS INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
Sequential
Exhibit Page
Number Number
2 Not applicable
4 Not applicable
10 Not applicable
11 Not applicable
15 Letter regarding unaudited interim
financial information
18 Not applicable
19 Not applicable
22 Not applicable
23 Consent of Experts and Counsel
24 Not applicable
27 Not applicable
99 Not applicable
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Exhibit 15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and
Board of Directors of
United Stationers Inc.:
We have reviewed the accompanying condensed consolidated balance sheet of
UNITED STATIONERS INC. (a Delaware Corporation) AND SUBSIDIARIES as of February
28, 1994, and the related condensed consolidated statements of income for the
three- and six-month periods ended February 28, 1994 and 1993, and the
condensed consolidated statements of cash flows for the six-month periods ended
February 28, 1994 and 1993. These financial statements are the responsibility
of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above
for them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of United Stationers Inc. and
Subsidiaries as of August 31, 1993 (not presented herein), and, in our report
dated October 6, 1993, we expressed an unqualified opinion on that statement.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of August 31, 1993, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.
/s/ARTHUR ANDERSEN & CO.
Chicago, Illinois
March 30, 1994
Exhibit 23
To United Stationers Inc.:
We are aware that United Stationers Inc.'s Form 10-Q for the quarter ended
February 28, 1994, which includes our report dated March 30, 1994, covering the
unaudited interim financial information contained therein, is incorporated by
reference into its previously filed Registration Statements on Form S-8 (File
Nos. 2-77628, 33-4729 and 33-32453) and into the previously filed Registration
Statement on Form S-3 (File No. 33-28251) of United Stationers Inc. Pursuant
to Regulation C of the Securities Act of 1933, that report is not considered a
part of the Registration Statements prepared or certified by our firm or a
report prepared or certified by our firm within the meaning of Sections 7 and
11 of the Act.
/s/ARTHUR ANDERSEN & CO.
Chicago, Illinois,
April 6, 1994
