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 September 30, 1995
UNITED STATIONERS INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-10653 36-3141189
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
2200 East Golf Road, Des Plaines, Illinois 60016-1267
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 699-5000
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 October 13, 1995, United Stationers Inc. had 5,707,911 shares of
Common Stock, $0.10 par value, and 379,497 shares of Nonvoting Common Stock,
$0.01 par value, outstanding.
This Form 10-Q consists of 24 pages with the Index to Exhibits appearing on
Page 24.
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Important Explanatory Note 3
Condensed Consolidated Balance Sheets as of
September 30, 1995 and December 31, 1994. 4
Condensed Consolidated Statements of Operations
for the Three Months Ended September 30, 1995
and 1994, the Three Months Ended June 30, 1995
and the Nine Months Ended September 30, 1995
and 1994. 5
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1995
and 1994. 7
Notes to Condensed Consolidated Financial Statements. 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 15
PART II - OTHER INFORMATION 22
SIGNATURE 23
INDEX TO EXHIBITS 24
-2-
UNITED STATIONERS INC. AND SUBSIDIARY
IMPORTANT EXPLANATORY NOTE
On March 30, 1995, Associated Holdings, Inc. ("Associated") was merged with
United Stationers Inc. (the "Company"). Although the Company was the surviving
corporation in the merger, the transaction was treated as a reverse acquisition
for accounting purposes, with Associated as the acquiring corporation. The
financial information for the quarters ended September 30 and June 30, 1995
reflect the results of the post-Merger Company. The nine month information for
Fiscal 1995 reflects Associated results only for the first quarter and the post-
Merger Company results for the six months ended September 30, 1995. The
quarter and nine months ended September 30, 1994 reflect the financial
information of Associated only.
-3-
UNITED STATIONERS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands of dollars)
ASSETS
(Unaudited) (Audited)
September 30, December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 10,612 $ 1,849
Accounts receivable, net 267,122 45,139
Inventories 328,165 88,197
Other current assets 28,641 3,795
Total Current Assets $634,540 $138,980
PROPERTY, PLANT AND EQUIPMENT, at cost $235,839 $ 58,277
Less-Accumulated depreciation and amortization (26,508) ( 12,830)
Net Property, Plant and Equipment $209,331 $ 45,447
GOODWILL, NET $ 72,669 $ 4,948
OTHER ASSETS, NET $ 38,998 $ 3,104
TOTAL ASSETS $955,538 $192,479
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities
of long-term obligations $ 21,443 $ 5,901
Accounts payable 211,524 54,351
Accrued liabilities 141,815 22,274
Total Current Liabilities $374,782 $ 82,526
DEFERRED TAXES $ 30,722 $ 2,060
LONG-TERM OBLIGATIONS:
Senior Revolver Loan $100,000 $ 39,910
Senior Subordinated Notes 150,000
Senior Term Loan - Tranche A 94,331 6,000
Senior Term Loan - Tranche B 71,111 9,557
Other Long-Term Debt 32,087
Other Long-Term Liabilities 19,981 2,812
TOTAL LONG-TERM OBLIGATIONS $467,510 $ 58,279
REDEEMABLE PREFERRED STOCK $ 17,620 $ 23,189
REDEEMABLE WARRANTS $ 20,553 $ 1,650
STOCKHOLDERS' EQUITY $ 44,351 $ 24,775
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $955,538 $192,479
The accompanying notes to condensed consolidated financial
statements are an integral part of these balance sheets.
-4-
UNITED STATIONERS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share data)
(Unaudited)
FOR THE THREE MONTHS ENDED
September 30, September 30,
1995 1994 *
NET SALES $537,624 $119,176
COST OF GOODS SOLD 421,000 89,710
Gross profit $116,624 $ 29,466
OPERATING EXPENSES:
Warehousing, marketing and
administrative expenses $ 95,103 $ 23,208
Income from operations $ 21,521 $ 6,258
INTEREST EXPENSE, net 14,070 1,871
Income before income taxes $ 7,451 $ 4,387
INCOME TAXES 3,278 1,685
NET INCOME $ 4,173 $ 2,702
PREFERRED STOCK DIVIDENDS ISSUED
AND ACCRUED 421 553
Net income attributable to
common shareholders $ 3,752 $ 2,149
Net Income Per Common and Common
Equivalent Share (Primary and
Fully Diluted) $0.27 $0.26
Average Number of Common Shares Used
in Primary Calculation 13,896,213 8,284,626
Average Number of Common Shares Used
in Fully Diluted Calculation 13,911,647 8,329,373
* Not reviewed by independent accountants.
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-5-
UNITED STATIONERS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share data)
(Unaudited)
FOR THE THREE MONTHS ENDED
September 30, September 30, June 30,
1995 1994 * 1995
NET SALES $537,624 $119,176 $529,429
COST OF GOODS SOLD 421,000 89,710 414,958
Gross profit $116,624 $ 29,466 $114,471
OPERATING EXPENSES:
Warehousing, marketing and
administrative expenses $ 95,103 $ 23,208 $ 96,592
Income from operations $ 21,521 $ 6,258 $ 17,879
INTEREST EXPENSE, net 14,070 1,871 15,340
Income before income taxes $ 7,451 $ 4,387 $ 2,539
INCOME TAXES 3,278 1,685 1,015
NET INCOME $ 4,173 $ 2,702 $ 1,524
PREFERRED STOCK DIVIDENDS ISSUED
AND ACCRUED 421 553 583
Net income attributable to
common shareholders $ 3,752 $ 2,149 $ 941
Net Income Per Common and Common
Equivalent Share (Primary and
Fully Diluted) $0.27 $0.26 $0.07
Average Number of Common Shares
Used in Primary Calculation 13,896,213 8,284,626 13,839,632
Average Number of Common Shares
Used in Fully Diluted
Calculation 13,911,647 8,329,373 13,839,632
* Not reviewed by independent accountants.
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-5-
UNITED STATIONERS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except share data)
(Unaudited)
FOR THE NINE MONTHS ENDED
September 30, September 30,
1995 1994 *
NET SALES $1,202,050 $349,436
COST OF GOODS SOLD 939,526 265,981
Gross profit $ 262,524 $ 83,455
OPERATING EXPENSES:
Warehousing, marketing and
administrative expenses $ 218,367 $ 71,229
Restructuring charge (Note 1) 9,759
Total operating expenses $ 228,126 $ 71,229
Income from operations $ 34,398 $ 12,226
INTEREST EXPENSE, net 31,612 5,767
Income before income taxes
and extraordinary item $ 2,786 $ 6,459
INCOME TAXES 1,322 2,481
Income before extraordinary item $ 1,464 $ 3,978
EXTRAORDINARY ITEM - loss on early retire-
ment of debt, net of taxes ($967) (Note 1) (1,449)
NET INCOME $ 15 $ 3,978
PREFERRED STOCK DIVIDENDS ISSUED
AND ACCRUED 1,577 1,630
Net income (loss) attributable to
common shareholders $ (1,562) $ 2,348
Net Income (Loss) Per Common and
Common Equivalent Share (Primary and
Fully Diluted):
Income (loss) before extraordinary item $(0.01) $0.28
Extraordinary item (0.14)
Net income (loss) per common and
common equivalent share $(0.15) $0.28
Average Number of Common Shares Used
in Primary Calculation 10,265,975 8,238,116
Average Number of Common Shares Used
in Fully Diluted Calculation 10,265,975 8,313,129
* Not reviewed by independent accountants.
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-6-
UNITED STATIONERS INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
FOR THE NINE MONTHS ENDED
September 30, September 30,
1995 1994 *
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 15 $ 3,978
Changes in operating assets and liabilities 82,300 12,713
Depreciation and amortization 16,982 3,831
Transaction cost and other amortization 4,909 954
Net cash provided by operating
activities $ 104,206 $ 21,476
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of the Company - net of cash
acquired of approximately $14,500 $(258,274) $
Capital expenditures (5,949) (486)
Net cash used in investing activities $(264,223) $ (486)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt $ 686,854 $
Retirements and payments of debt (408,439) (3,000)
Net repayment under revolver (88,608) (17,000)
Financing costs (25,290)
Issuance of common stock 12,006
Retirement of Class B Preferred Stock (7,000)
Cash dividend (Class C Preferred) (252)
Other (491) (564)
Net cash provided by (used in) financing
activities $ 168,780 $(20,564)
NET CHANGE IN CASH $ 8,763 $ 426
Cash and Cash Equivalents, beginning of period 1,849 991
Cash and Cash Equivalents, end of period $ 10,612 $ 1,417
Other Cash Flow Information
Cash payments during the nine month period for:
Income taxes paid $ 7,572 $ 887
Interest paid 20,049 4,971
Noncash investing and financing activities:
Common stock issued in exchange for
services related to financing the
acquisition of the Company $ 4,600
Common stock issued to retire a deferred
obligation related to an agreement
for contracted services $ 9,000
* Not reviewed by independent accountants.
The accompanying notes to condensed consolidated financial
statements are an integral part of these statements.
-7-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Business Combination and Restructuring Charge
On March 30, 1995, pursuant to an Agreement and Plan of Merger, dated as of
February 13, 1995 (the "Merger Agreement"), between Associated Holdings, Inc.,
a Delaware corporation ("Associated") and United Stationers Inc., a Delaware
corporation (the "Company") and Associated's related Offer to Purchase dated
February 21, 1995 (the "Offer"), Associated purchased 17,201,839 shares of
Common Stock, $0.10 par value (the "Shares"), of the Company at a purchase
price of $15.50 per share, or approximately $266.6 million, from the Company's
stockholders. On March 30, 1995, pursuant to the terms of the Merger
Agreement, Associated was merged with and into the Company, with the Company
surviving (the "Merger"), and immediately thereafter, Associated Stationers,
Inc., a Delaware corporation and wholly owned subsidiary of Associated ("ASI")
was merged with and into United Stationers Supply Co., an Illinois corporation
and wholly owned subsidiary of the Company ("USSC"), with USSC surviving. The
acquisition of the Shares by Associated pursuant to the Offer together with the
Merger is referred to herein as the "Acquisition."
Immediately following the Merger, the number of outstanding Shares was
5,998,077 (or 6,973,720 on a fully diluted basis), of which (i) the former
holders of Class A Common Stock, $0.01 par value, and Class B Common Stock,
$0.01 par value, of Associated ("Associated Common Stock") and warrants or
options to purchase Associated Common Stock in the aggregate owned 4,603,333
Shares constituting approximately 76.7% of the outstanding Shares and
outstanding warrants or options for 975,643 Shares (collectively 80.0% on a
fully diluted basis) and (ii) pre-Merger holders of Shares (other than
Associated-owned Shares and treasury Shares) in the aggregate owned 1,394,744
Shares constituting approximately 23.3% of the outstanding Shares (or 20.0% on
a fully diluted basis). As used in this paragraph, the term "Shares" includes
shares of Nonvoting Common Stock, $0.01 par value, of the Company, which are
immediately convertible into voting Shares for no additional consideration.
To finance the Offer, refinance existing debt of ASI, repurchase stock options
and pay related fees and expenses, Associated, ASI, USSC and the Company
entered into (i) new credit facilities ("New Credit Facilities") with a group
of banks and financial institutions providing for term loan borrowings of
$200.0 million and revolving loan borrowings of up to $300.0 million and (ii) a
senior subordinated bridge loan facility in the aggregate principal amount of
$130.0 million (the "Subordinated Bridge Facility"). In addition,
simultaneously with the consummation of the Offer, Associated obtained $12.0
million from the sale of additional shares of Associated Common Stock, which
proceeds were used to finance the purchase of a portion of the Shares pursuant
to the Offer.
-8-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Business Combination and Restructuring Charge (Continued)
On May 3, 1995, USSC completed the issuance of $150.0 million of 12 3/4% Senior
Subordinated Notes (the "Notes") due 2005. The net proceeds of the Notes
(after discount and fees of approximately $5.5 million) were used to pay
certain expenses, to repay the $130.0 million Subordinated Bridge Facility
(together with $1.6 million in accrued and unpaid interest thereon), to repay a
portion of the Tranche A and Tranche B term loans (totaling approximately $6.5
million) and provide working capital. Subsequently, on July 28, 1995 in an
aggregate amount of $7.0 million, the Company repurchased all the Series B
Preferred Stock, together with accrued and unpaid dividends.
Although the Company was the surviving corporation in the Merger, the
transaction was treated as a reverse acquisition for accounting purposes with
Associated as the acquiring corporation. The total purchase price of
approximately $294.4 million was allocated to assets and liabilities of the
Company based on the estimated fair value as of the date of acquisition. The
allocation was based on preliminary estimates which may be revised at a later
date. The excess of consideration paid over the estimated fair value of net
assets acquired in the amount of $68.7 million has been recorded as goodwill
and is being amortized on a straight-line basis over 40 years.
The Condensed Consolidated Balance Sheet as of September 30, 1995 reflects the
post-Merger Company. The Condensed Consolidated Balance Sheet as of December
31, 1994 reflects Associated only. The Condensed Consolidated Statements of
Operations and Cash Flows for Fiscal 1995 reflect Associated only for the
quarter ended March 31, 1995, and the post-Merger Company for the six months
ended September 30, 1995. The Condensed Consolidated Statements of Operations
and Cash Flows for Fiscal 1994 reflect Associated only.
The actual results for the nine months ended September 30, 1995 include a
restructuring charge of $9.8 million ($5.9 million net of tax benefit of $3.9
million). The restructuring charge includes severance costs totaling $3.0
million. The consolidation plan specifies that certain distribution,
sales, and corporate positions, approximately 90 in total, will be eliminated
substantially within a one-year period. As of September 30, 1995,
approximately 35 employees have been terminated with the related benefits of
approximately $0.5 million charged against the reserve. The restructuring
charge also includes distribution center closing costs totaling $4.7 million
and stockkeeping unit reduction costs totaling $2.1 million. The consolidation
plan specifies the closing of five redundant distribution centers and the
elimination of overlapping inventory items from the Company's catalogs
substantially within a one-year period. Distribution center closing costs
include 1) the net occupancy costs of leased facilities after they are vacated
until expiration of leases and
-9-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Business Combination and Restructuring Charge (Continued)
2) the losses on the sale of owned facilities and the facilities' furniture,
fixtures, and equipment. Stockkeeping unit reduction costs include losses on
the sale of inventory items which have been discontinued solely as a result of
the Acquisition and Merger. As of September 30, 1995, no amounts relating to
distribution center closing costs or the reduction of stockkeeping units have
been charged against the reserve.
The actual results for the nine months ended September 30, 1995 include an
extraordinary write-off of approximately $2.4 million ($1.4 million net of tax
benefit of $1.0 million) of financing costs and original issue discount
relating to the debt retired. In addition, the actual results for the nine
months ended September 30, 1995 include compensation expense relating to an
increase in the value of employee stock options of approximately $1.5 million
($0.9 million net of tax benefit) as a result of the Acquisition and Merger.
The following summarized unaudited pro forma results of operations for the nine
months ended September 30, 1995 and 1994 is presented giving effect to the
Acquisition as if it had been consummated at the beginning of the respective
periods and, therefore, reflects the results of the Company and Associated on a
combined basis for the period from January 1, 1995 through September 30, 1995
and January 1, 1994 through September 30, 1994, respectively. These pro forma
results have been prepared for comparative purposes only and do not purport to
be indicative of the results of operations that actually would have resulted
had the combination been in effect on the dates indicated, or which may result
in the future. The pro forma results exclude one-time non-recurring charges or
credits directly attributable to the transaction. The estimated cost savings
that the Company expects to realize ($26.0 million on a total year basis and
$6.5 million on a quarterly basis) pursuant to its consolidation plan that has
been approved by the Board of Directors of the Company have been reflected in
the pro forma results, net of actual savings realized, as if the Company's
consolidation plan had been implemented in full for the periods reflected. The
Company plans to implement its consolidation plan over a 12-month period
following the Acquisition.
The pro forma income statement adjustments consisted of (i) estimated cost
savings of $19.5 million that the Company expects to realize, (ii) increased
depreciation expense resulting from the write-up of certain fixed assets to
fair value, (iii) additional incremental goodwill amortization, (iv) additional
incremental interest expense due to debt issued, net of debt retired, and (v)
reduction in preferred stock dividends due to the assumed retirement of the
Series B Preferred Stock. On July 28, 1995 in an aggregate amount of $7.0
million, the Company repurchased all the Series B Preferred Stock, together
with accrued and unpaid dividends.
-10-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Business Combination and Restructuring Charge (Continued)
Pro Forma Nine Months Ended September 30,
% of total
(In thousands of dollars) net sales
1995 1994 1995 1994
Net sales $1,651,948 $1,469,950 100.0% 100.0%
Gross profit 359,756 331,257 21.8 22.5
Warehouse, distribution,
selling and administrative
expenses 279,919 275,963 17.0 18.7
Income from operations 79,837 55,294 4.8 3.8
Interest expense, net 44,098 36,246 2.6 2.5
Income before income taxes 35,739 19,048 2.2 1.3
Income taxes 14,210 7,604 .9 .5
Net income 21,529 11,444 1.3 .8
Preferred stock dividends
issued and accrued 1,304 1,206 .1 .1
Net income attributable to
common stockholders 20,225 10,238 1.2 .7
Net income per common and
common equivalent share:
Primary $1.46 $0.73
Fully diluted $1.46 $0.73
Average number of common
shares outstanding:
Primary 13,863,617 13,929,289
Fully diluted 13,892,740 13,929,289
EBITDA * $103,514 $79,549
* EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and is presented because it is commonly used by certain investors
and analysts to analyze and compare companies on the basis of operating
performance and to determine a company's ability to service and incur debt.
EBITDA should not be considered in isolation from or as a substitute for net
income, cash flows from operating activities or other consolidated income or
cash flow statement data prepared in accordance with generally accepted
accounting principles or as a measure of profitability or liquidity. EBITDA
includes a LIFO charge of $7.5 million and $2.4 million for the nine months
ended September 30, 1995 and 1994, respectively.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of the results of operations that actually would
have resulted had the combination been in effect on the dates indicated, or
which may result in the future.
-11-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(2) Change in Accounting Principle
Effective January 1, 1995, Associated changed its method of accounting for the
cost of inventory from the FIFO method to the LIFO method. Associated made
this change in contemplation of its acquisition of the Company (accounted for
as a reverse acquisition) so that its method would conform to that of the
Company. Associated believed that in an inflationary environment the LIFO
method provides a better matching of current costs and current revenues and
that earnings reported under the LIFO method are more easily compared to that
of other companies in the wholesale industry where the LIFO method is common.
This change resulted in a charge to pre-tax income of approximately $7.5
million ($3.9 million net of tax benefit) or
$0.38 per common and common equivalent share for the nine months ended
September 30, 1995. The charge to pre-tax income was approximately $4.9
million ($2.7 million net of tax benefit) or $0.19 per common and common
equivalent share for the three months ended September 30, 1995. In the second
quarter of 1995, the charge to pre-tax income was approximately $2.2 million
($1.3 million net of tax benefit) or $0.09 per common and common equivalent
share. The cumulative effect of this accounting change for years prior to 1995
is not determinable, nor are the pro forma effects of retroactive application
of the LIFO method to prior years.
(3) Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited,
except for the Associated Consolidated Balance Sheet as of December 31, 1994,
which is condensed from the audited Consolidated Balance Sheet of Associated at
that date. Certain current and prior-year amounts have been reclassified to
conform with the current presentation format.
A reclassification of dealer marketing allowances from expense to a reduction
in sales decreased net sales by $5.9 million and $2.3 million in the second and
first quarter of 1995, respectively, and $1.8 million in each of the first
three quarters of 1994.
These financial statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. 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
-12-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(3) Basis of Presentation (Continued)
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.
Other than the restructuring charge, the extraordinary item and the
compensation expense relating to employee stock options, these adjustments were
of a normal recurring nature and did not have a material impact on the
financial statements presented. Certain interim expense and inventory
estimates are recognized throughout the fiscal year relating to marginal income
tax rates, shrinkage, inflation and product mix. Any appropriate adjustments
to reflect actual experience, which historically have been immaterial, will be
recognized in the fourth quarter.
The Redeemable Warrants reflected on the Balance Sheet are adjusted on an on-
going basis for any exercises to common stock, the revaluation to the current
market price of the Company's common stock and any dilutive impact such as the
issuance of stock options by the Company. During the
third quarter of 1995, the Company announced that its Board of Directors
approved an amendment to its Employee Stock Option Plan, subject to stockholder
approval, which provides for the issuance of options to management employees of
the Company exercisable for up to 2.2 million additional shares of its common
stock of which approximately 1.8 million were granted (after giving effect to
the 100% common stock dividend). At the same time, the Company amended the
vesting, exercise and termination benefits of options outstanding prior to the
new grant of shares to more closely align the existing option terms with the
terms of the new options.
(4) Review
Ernst & Young LLP, independent public accountants, have performed a review of
the Fiscal 1995 condensed consolidated financial statements referred to above.
Since they did not perform an audit, they express no opinion on these
statements. Refer to the Independent Accountant's Review Report included in
this filing.
(5) Net Income (Loss) Per Common and Common Equivalent Share
Net income (loss) per common and common equivalent share is based on net income
(loss) after preferred stock dividend requirements. Net income per common and
common equivalent share in the third quarter of 1995 and 1994, the second
quarter of 1995 and the nine months ended September 30, 1994 on a primary and
fully diluted basis are computed using the weighted average
-13-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(5) Net Income (Loss) Per Common and Common Equivalent Share (Continued)
number of shares outstanding adjusted for the effect of stock options and
warrants considered to be dilutive common stock equivalents. For the nine
months ended September 30, 1995, the stock options and warrants were excluded
from the calculation of net loss per common and common equivalent shares as
they would be anti-dilutive. The number of common and common equivalent shares
from before the Merger have been adjusted to reflect the post-Merger capital
structure. In addition, the number of common and common equivalent shares have
been adjusted for the 100% common stock dividend declared on October 12, 1995.
See Note 6, Subsequent Event.
(6) Subsequent Event
On October 12, 1995, United Stationers Inc. declared a 100% common stock
dividend payable share-for-share on November 9, 1995 to stockholders of record
as of October 26, 1995. Share numbers used to calculate per share amounts and
share amounts in the accompanying financial statements have been adjusted for
the dividend.
-14-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Quarter Restructuring Charge
The actual results for the nine months ended September 30, 1995 include a
restructuring charge of $9.8 million ($5.9 million net of tax benefit of $3.9
million). The restructuring charge includes severance costs totaling $3.0
million. The consolidation plan specifies that certain distribution,
sales, and corporate positions, approximately 90 in total, will be eliminated
substantially within a one-year period. As of September 30, 1995,
approximately 35 employees have been terminated with the related benefits of
approximately $0.5 million charged against the reserve. The restructuring
charge also includes distribution center closing costs totaling $4.7 million
and stockkeeping unit reduction costs totaling $2.1 million. The consolidation
plan specifies the closing of five redundant distribution centers and the
elimination of overlapping inventory items from the Company's catalogs
substantially within a one-year period. Distribution center closing costs
include 1) the net occupancy costs of leased facilities after they are vacated
until expiration of leases and 2) the losses on the sale of owned facilities
and the facilities' furniture, fixtures, and equipment. Stockkeeping unit
reduction costs include losses on the sale of inventory items which have been
discontinued solely as a result of the Acquisition and Merger. As of September
30, 1995, no amounts have been charged against the reserve.
The actual results for the nine months ended September 30, 1995 include an
extraordinary write-off of approximately $2.4 million ($1.4 million net of tax
benefit of $1.0 million) of financing costs and original issue discount
relating to the debt retired. In addition, the actual results for the nine
months ended September 30, 1995 include compensation expense relating to an
increase in the value of employee stock options of approximately $1.5 million
($0.9 million net of tax benefit) as a result of the Acquisition and Merger.
Comparison of Historical Third Quarter - Three Months Ended
September 30, 1995 and 1994
Net Sales. Net sales were $537.6 million in the third quarter of 1995 compared
to $119.2 million in the third quarter of 1994. The increase is primarily the
result of the Merger.
Gross Profit. Gross profit as a percent of net sales decreased to 21.7% in the
third quarter of 1995 from 24.7% in the comparable period of 1994. The lower
margin rate reflects a shift in product mix and the change in the method of
accounting for inventory from the FIFO method to the LIFO method. See Note 2,
Change in Accounting Principle.
-15-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Historical Third Quarter - Three Months Ended
September 30, 1995 and 1994 (Continued)
Operating Expenses. Operating expenses as a percent of net sales decreased to
17.7% in the third quarter of 1995 from 19.4% in the third quarter of 1994.
The decrease in operating expenses as a percent of net sales is primarily due
to increased operating efficiencies and improved productivity.
Income from Operations. Income from operations as a percent of net sales was
4.0% in the third quarter of 1995 compared to 5.3% in the third quarter of
1994.
Interest Expense. Interest expense as a percent of net sales was 2.6% in the
third quarter of 1995 compared to 1.6% in the comparable period in 1994. The
increase reflects additional debt needed to consummate the Acquisition and
Merger and higher interest rates in 1995.
Income Before Income Taxes. Income before income taxes as a percent of net
sales was 1.4% in the third quarter of 1995 compared to 3.7% in the third
quarter of 1994. Net income was $4.2 million in the third quarter of 1995
compared to $2.7 million in the third quarter of 1994.
Comparison of Historical Three Months Ended September 30, 1995 and
June 30, 1995
Net Sales. Net sales were $537.6 million in the third quarter of 1995 compared
to $529.4 million in the second quarter of 1995.
Gross Profit. Gross profit as a percent of net sales increased to 21.7% in the
third quarter of 1995 from 21.6% in the second quarter of 1995 primarily as a
result of increased vendor allowances.
Operating Expenses. Operating expenses as a percent of net sales decreased to
17.7% in the third quarter of 1995 from 18.2% in the second quarter of 1995.
The decrease reflects the realization of merger related benefits.
Income from Operations. Income from operations as a percent of net sales was
4.0% in the third quarter of 1995 compared to 3.4% in the second quarter of
1995.
Interest Expense. Interest expense as a percent of net sales was 2.6% in the
third quarter of 1995 compared to 2.9% in the second quarter of 1995. The
decrease reflects lower working capital requirements.
-16-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Historical Three Months Ended September 30, 1995 and
June 30, 1995 (Continued)
Income Before Income Taxes. Income before income taxes as a percent of net
sales was 1.4% in the third quarter of 1995 compared to 0.5% in the second
quarter of 1995. Net income was $4.2 million in the third quarter of 1995
compared to $1.5 million in the second quarter of 1995.
Comparison of Historical Nine Months Ended September 30, 1995 and 1994
Net Sales. Net sales were $1,202.1 million for the first nine months of 1995
compared to $349.4 million in the first nine months of 1994. The increase is
primarily the result of the Merger.
Gross Profit. Gross profit as a percent of net sales decreased to 21.8% in the
first nine months of 1995 from 23.9% in the comparable period of 1994. The
lower margin rate reflects a shift in product mix and the change in the method
of accounting for inventory from the FIFO method to the LIFO method.
Operating Expenses. Operating expenses as a percent of net sales decreased to
19.0% in the first nine months of 1995 from 20.4% in the first nine months of
1994. The actual results for the nine months ended September 30, 1995 include
the impact of a restructuring charge of $9.8 million ($5.9 million net of tax
benefit of $3.9 million) in the first quarter of 1995. Operating expenses
before the restructuring charge were 18.2% in the first nine months of 1995.
The decrease in operating expenses as a percent of net sales before the
restructuring charge is primarily due to increased operating efficiencies and
improved productivity, partially offset by Merger related compensation expense
relating to an increase in the value of employee stock options of approximately
$1.5 million ($0.9 million net of tax benefit).
Income from Operations. Income from operations as a percent of net sales was
2.8% in the first nine months of 1995 (after the restructuring charge) compared
to 3.5% in the first nine months of 1994.
Interest Expense. Interest expense as a percent of net sales was 2.6% in the
first nine months of 1995 compared to 1.7% in the comparable period in 1994.
The increase reflects additional debt needed to consummate the Acquisition and
Merger and higher interest rates in 1995.
Income Before Income Taxes and Extraordinary Item. Income before income taxes
and extraordinary item as a percent of net sales was 0.2% in the first nine
months of 1995 compared to 1.8% in the first nine months of 1994. Net income
before extraordinary items was $1.5 million in the first nine months of 1995
compared to $4.0 million in the first nine months of
-17-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Comparison of Historical Nine Months Ended September 30, 1995 and 1994
(Continued)
1994. An extraordinary item, the loss on early retirement of debt related to
the Merger of $2.4 million ($1.4 million after tax benefit), was recognized in
the first quarter of 1995. The net income was $0.0 million ($15 thousand) in
the first nine months of 1995 compared to $4.0 million in the comparable period
in 1994.
Comparison of Pro Forma Nine Months Ended September 30, 1995 and 1994
Net Sales. Net sales were $1,651.9 million for the first nine months of 1995,
a 12.4% increase over net sales of $1,470.0 million in the comparable period in
1994. The increase in net sales is primarily the result of changes in unit
volume rather than changes in prices.
Gross Profit. Gross profit as a percent of net sales decreased to 21.8% in the
first nine months of 1995 from 22.5% in the comparable period of 1994. The
lower margin rate reflects a shift in product mix and the change in the method
of accounting for inventory from the FIFO method to the LIFO method. See Note
2, Change in Accounting Principle.
Operating Expenses. Operating expenses as a percent of net sales decreased to
17.0% in the first nine months of 1995 from 18.7% in the first nine months of
1994. The decrease in operating expenses as a percent of net sales is
primarily due to increased operating efficiencies and improved productivity.
Income from Operations. Income from operations as a percent of net sales was
4.8% in the first nine months of 1995 compared to 3.8% in the first nine months
of 1994.
Interest Expense. Interest expense as a percent of net sales was 2.6% in the
first nine months of 1995 compared to 2.5% in the comparable period in 1994.
The increase reflects higher interest rates in 1995.
Income Before Income Taxes. Income before income taxes as a percent of net
sales was 2.2% in the first nine months of 1995 compared to 1.3% in the first
nine months of 1994. Net income was $21.5 million in the first nine months of
1995 compared to $11.4 million in the comparable period in 1994.
-18-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
In connection with the consummation of the Acquisition, Associated received an
equity investment of $12.0 million and borrowed an aggregate of $416.5 million
under the New Credit Facilities and $130.0 million under the Subordinated
Bridge Facility. The proceeds of these investments and borrowings were used to
(i) finance the purchase of Shares pursuant to the Offer, (ii) refinance
certain existing indebtedness of Associated (including all amounts outstanding
under the existing old Associated credit facilities) and indebtedness of the
Company (including certain amounts outstanding under the old Company and USSC
credit facilities), (iii) redeem Company employee stock options, and (iv) pay
fees and expenses relating to the Acquisition.
The New Credit Facilities consist of $200.0 million of term loan borrowings
("Term Loan Facilities") and up to $300.0 million of revolving loan borrowings
("Revolving Credit Facility").
On May 3, 1995, USSC completed the issuance of $150.0 million of 12 3/4% Senior
Subordinated Notes (the "Notes") due 2005. The net proceeds of the Notes
(after discount and fees of approximately $5.5 million) were used to pay
certain expenses, to repay the $130.0 million Subordinated Bridge
Facility (together with $1.6 million in accrued and unpaid interest thereon),
to repay a portion of the Tranche A and Tranche B term loans and accrued
interest (totaling approximately $6.5 million) and provide working capital.
Prior to the offering of the Notes and the related prepayment of a portion of
the Term Loan Facilities, the Term Loan Facilities consisted of a $125.0
million Tranche A term loan facility ("Tranche A Facility") and a $75.0 million
Tranche B term loan facility ("Tranche B Facility"). Amounts outstanding under
the Tranche A Facility are required to be repaid in 20 consecutive
installments, the first four of which (each in the aggregate principal amount
of $3.75 million) are due on the last day of each of the first four calendar
quarters which commenced with the quarter ended June 30, 1995. Subsequent
quarterly payments under the Tranche A Facility are each in the aggregate
principal amount of $6.25 million for each of the eight consecutive calendar
quarters commencing with the quarter ending June 30, 1996 and $7.5 million for
each of the eight consecutive calendar quarters commencing with the quarter
ending June 30, 1998. Amounts outstanding under the Tranche B Facility will be
repaid in 28 consecutive quarterly installments, the first twenty of which (in
the aggregate
principal amount of $0.25 million each) are due on the last day of each of the
first twenty calendar quarters which commenced with the quarter ended June 30,
1995. The remaining eight installments in the aggregate principal
-19-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (Continued)
amount of $8.75 million each will be due on the last day of each calendar
quarter commencing with the quarter ending June 30, 2000. The final
installments under the Tranche A Facility and the Tranche B Facility will be
payable on March 31, 2000 and March 31, 2002, respectively.
The Revolving Credit Facility is limited to the lesser of $300.0 million or a
borrowing base equal to: 80% of Eligible Receivables (as defined in the New
Credit Agreement); plus 50% of Eligible Inventory (as defined in the New Credit
Agreement) (provided that no more than 60% or, during certain periods 65%, of
the Borrowing Base may be attributable to Eligible Inventory); plus the
aggregate amount of cover for Letter of Credit Liabilities (as defined). The
Revolving Credit Facility provides that, for each fiscal year commencing
January 1, 1996, the Company must repay revolving loans so that for a
consecutive period of 30 consecutive days in each fiscal year the aggregate
revolving loans do not exceed $200.0 million. The Revolving Credit Facility
matures on March 31, 2000.
The Term Loan Facilities and the Revolving Credit Facility are secured by first
priority pledges of the stock of USSC, all of the stock of the domestic direct
and indirect subsidiaries of USSC, certain of the stock of
all of the foreign direct and indirect subsidiaries of USSC and security
interests in and liens upon all accounts receivable, inventory, contract rights
and other certain personal and certain real property of USSC and its domestic
subsidiaries.
The agreement governing the New Credit Facilities (the "New Credit Facilities
Agreement") contains representations and warranties, affirmative and negative
covenants and events of default customary for financings of this type.
The New Credit Facilities permit capital expenditures for the Company of up to
$12.0 million for the post-Merger portion of its fiscal year ending December
31, 1995. Capital expenditures will be financed from internally generated
funds and available borrowings under the New Credit Facilities.
Management anticipates making changes in the operations of the Company and
Associated as conducted prior to the Acquisition. Consistent with its business
strategy, since the consummation of the Acquisition on March 30, 1995, the
Company has been implementing its consolidation plan to integrate its business
with the business of Associated. Through the integration of distribution
facilities and product lines in a manner designed to enable the Company to
offer its customers increased service and product
availability, the Company expects to improve its competitive position. In
addition, the Company plans to achieve cost savings and other benefits from
the elimination of redundant or overlapping functions and facilities and by
-20-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources (Continued)
minimizing overlapping products. Based on internally generated funds and the
expected results of these changes, management believes that the Company's cash
on hand, anticipated funds generated from operations and available borrowings
under the New Credit Facilities will be sufficient to meet the short-term (less
than twelve months) and long-term operating and capital needs of the Company
after the Acquisition as well as to service its debt in accordance with its
terms. There is, however, no assurance this will be accomplished.
On July 28, 1995, the Company repurchased all the Series B Preferred Stock.
Quarterly dividends currently accrue on United's two outstanding series of the
preferred stock at the respective rates of 10.0% for Series A and 9.0% for
Series C per annum (or, when dividends are not paid in cash, 13.0% for Series A
and 10.0% for Series C), and may be paid in the form of additional shares of
the respective series of preferred stock (except, in the case of the Series C
Preferred Stock, for dividends payable after January 31, 1999). Based upon the
Company's anticipated operating results and the requirements under the New
Credit Agreement and the Indenture, management expects to pay dividends on the
preferred stock when such dividends become due and payable in kind (rather than
in cash) for the foreseeable future.
-21-
UNITED STATIONERS INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Number
2 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 Not applicable
24 Not applicable
27 Not applicable
99 Not applicable
-22-
UNITED STATIONERS INC. AND SUBSIDIARY
SIGNATURE
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: October 30, 1995 /s/Daniel H. Bushell
Executive Vice President and
Chief Financial Officer
-23-
UNITED STATIONERS INC. AND SUBSIDIARY
SIGNATURE
Pursuant to the requirements of the Securities and 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: October 30, 1995
Daniel H. Bushell
Executive Vice President and
Chief Financial Officer
-23-
UNITED STATIONERS INC. AND SUBSIDIARY
INDEX TO EXHIBITS
(a) Exhibit
Number
2 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 Not applicable
24 Not applicable
27 Not applicable
99 Not applicable
-24-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5 OTHER INFORMATION - HISTORICAL SUMMARY FINANCIAL INFORMATION
(Continued) THE COMPANY - HISTORICAL
The summary financial information of the Company set forth below for
each of the fiscal years in the five-year period ended August 31, 1994 has been
derived from the financial statements of the Company, which have been audited
by Arthur Andersen LLP, independent public accountants. The summary financial
information for the six-month periods ended February 28, 1994 and 1995 is
unaudited and in the opinion of management reflects all adjustments considered
necessary for a fair presentation of such data. The results of operations for
any interim period are not necessarily indicative of results of operations for
the fiscal year and should be read in conjunction with, and is qualified in its
entirety by, "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Historical Results of Operations of the Company" and
"Historical Liquidity and Capital Resources of the Company" and the financial
statements of the Company included in the Company's Form 10-K for the fiscal
year ended August 31, 1994.
Six Months Ended
Year Ended August 31, February 28,
(dollars in thousands) 1990 1991 1992 1993 1994
1994 1995
(unaudited)
Income Statement Data:
Net sales $933,178$951,109$1,094,275$1,470,115$1,473,024 $ 740,585
$833,838
Gross profit on sales224,230218,708245,687344,519322,901 167,334 175,586
Operating expenses 195,863195,694219,285 298,405286,607 145,739145,469
Income from operations28,36723,01426,402 46,114 36,294 21,59530,117
Interest expense, net7,350 6,082 6,503 9,550 10,461 4,984 6,226
Income before income taxes 21,361 16,918 20,263 36,91926,058 16,697
23,953
Income taxes 8,523 7,008 8,899 15,559 10,309 6,929 9,648
Net income 12,838 9,910 11,364 21,360 15,749 9,768 14,305
Operating and Other Data:
EBITDA (1) $ 43,851$ 41,912$ 46,645$ 67,712$ 57,755$ 32,089 $ 40,949
EBITDA margin (2) 4.4% 4.4% 4.3% 4.6% 3.9% 4.3% 4.9%
Depreciation & amort.$ 15,140$ 18,912$ 19,879$ 21,243$ 21,236$ 10,408 $
10,770
Net capital expenditures15,06715,7658,291 29,958 10,499 3,312 4,812
Balance Sheet Data (at period end):
Working capital $134,420$135,347$ 214,611$ 216,074$ 239,827$287,308 $262,725
Total assets 401,661409,958601,465 634,786618,550655,029700,235
Total debt and capital
leases (3) 73,683 73,123150,728 150,251155,803209,955198,485
Stockholders' investment177,777181,584223,387237,697246,010243,831256,541
____________
(1) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization and is presented because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance
with generally accepted accounting principles or as a measure of
profitability or liquidity.
(2) EBITDA margin represents EBITDA as a percentage of net sales.
(3) Total debt and capital leases includes current maturities but excludes
original issue discount.
-19-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5 OTHER INFORMATION - HISTORICAL SUMMARY FINANCIAL INFORMATION
(Continued) ASSOCIATED - HISTORICAL
The summary financial information of Associated set forth below with
respect to the years ended December 31, 1994 and 1993 and the period from
January 31, 1992 (when certain of the assets and certain liabilities of ASI
were acquired (the "Boise Transaction") from the Wholesale Division of Boise
Cascade Office Products Corporation ("BCOP")) through December 31, 1992 has
been derived from and should be read in conjunction with, and is qualified in
its entirety by, "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Historical Results of Operations of Associated" and
"Historical Liquidity and Capital Resources of Associated" and the financial
statements of Associated included in the Company's Form 8-K filed April 14,
1995, which have been audited by Arthur Andersen LLP, independent public
accountants. The data at and for the years ended December 31, 1990 and 1991
and the one month ended January 31, 1992 is derived from the unaudited
financial statements of BCOP for such periods. Associated has accounted for
the Boise Transaction using the purchase method of accounting. There are
material operational and accounting differences between BCOP and Associated
resulting from the Boise Transaction. Accordingly, the historical financial
data of BCOP may not be comparable in all material respects with data of
Associated.
Predecessor (1) (2)
Associated
January 1
January 31
Year Ended to to
Year Ended
December 31, January 31, December 31,
December 31,
(dollars in thousands) 1990 (3) 1991 (4) 1992 (5)
1992 1993 1994
(unaudited)
Income Statement Data:
Net sales $443,547 $411,343 $39,016$365,944 $462,531 $477,445
Gross profit 112,324 103,253 9,142 89,398 112,280 120,169
Operating expenses 90,773 88,374 7,723 79,889 102,274 103,020
Income from operations 21,551 14,879 1,419 9,509 10,006 17,149
Interest expense - - - 4,782 6,263 6,753
Income before income taxes - - - 4,727 3,743 10,396
Income taxes - - - 1,777 781 3,993
Net income - - - 2,950 2,962 6,403
Preferred stock dividends issued
and accrued - - - 1,449 2,047 2,193
Net income available for common
stock shareholders - - - 1,501 915 4,210
Operating and Other Data:
EBITDA (6) $ 24,511 $ 18,028 $ 1,661$ 14,875 $ 16,481 $ 23,505
EBITDA margin (7) 5.5% 4.4% 4.3% 4.1% 3.6% 4.9%
Depreciation and amortization$ 2,960$ 3,149$ 242$ 5,366$ 6,475$ 6,356
Capital expenditures, net8,129 273 (36) 4,289 3,273 554
Predecessor (1)
Associated
At December 31,
(dollars in thousands) 1990 (3) 1991 (4) 1992
1993 1994
(unaudited)
Balance Sheet Data:
Working capital $ 60,726 $ 54,373$ 46,396 $ 57,302 $ 56,454
Total assets 151,432 140,756 179,069 190,979 192,479
Total debt and capital leases (8) - - 78,297 86,350
64,623
Redeemable preferred stock - - 18,949 20,996 23,189
Redeemable warrants - - 1,435 1,435 1,650
Total stockholders' or predecessor
division equity 102,871 93,642 10,466 11,422 24,775
-20-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5 HISTORICAL SUMMARY FINANCIAL INFORMATION (Continued)
ASSOCIATED - HISTORICAL
(1)The capital structure and accounting basis of the assets and liabilities of
the predecessor of ASI, BCOP, differ from those of Associated and ASI.
Accordingly, certain of the financial information for periods before
January 31, 1992 is not comparable to that for periods after January 31,
1992 and therefore is not presented in this table.
(2)The Predecessor operated as a segment of BCOP. BCOP did not allocate
income tax or interest expense to the Predecessor. Accordingly, actual
operating results for the Predecessor reflect only income from operations
before interest expense and income taxes.
(3)Derived from the unaudited financial statements of BCOP at and for the year
ended December 31, 1990.
(4)Derived from the unaudited financial statements of BCOP at and for the year
ended December 31, 1991.
(5)Derived from the unaudited financial statements of BCOP for the one month
ended January 31, 1992.
(6)EBITDA is defined as earnings before interest taxes, depreciation and
amortization and is presented because it is commonly used by certain
investors and analysts to analyze and compare companies on the basis of
operating performance and to determine a company's ability to service and
incur debt. EBITDA should not be considered in isolation from or as a
substitute for net income, cash flows from operating activities or other
consolidated income or cash flow statement data prepared in accordance with
generally accepted accounting principles or as a measure of profitability
or liquidity.
(7)EBITDA margin represents EBITDA as a percentage of net sales.
(8)Total debt and capital leases is defined as long-term debt including
current maturities but excluding original issue discount, plus deferred
obligations due to the holder of the Associated Class B redeemable
preferred stock.
-21-
Exhibit 15
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
The Board of Directors
United Stationers Inc.
We have reviewed the accompanying condensed consolidated balance sheet of
United Stationers Inc. (previously doing business as Associated Holdings,
Inc.) and subsidiary as of September 30, 1995, and the related condensed
consolidated statements of operations for the three-month and nine-month
periods ended September 30, 1995 and the three-month period ended June 30,
1995, and the condensed consolidated statement of cash flows for the nine-
month period ended September 30, 1995. These financial statements are the
responsibility of the Company's management. We did not perform a similar
review of the condensed consolidated statements of operations and cash
flows of United Stationers Inc. for the corresponding periods of the prior
year.
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, which will be performed for the full year with the objective of
expressing 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 accompanying condensed consolidated financial
statements at September 30, 1995, and for the three-month and nine-month
periods then ended and the condensed consolidated statement of operations
for the three-month period ended June 30, 1995 for them to be in conformity
with generally accepted accounting principles.
The consolidated balance sheet of United Stationers Inc. as of December 31,
1994, and the related consolidated statements of income, stockholders'
equity and cash flows for the year then ended (not presented herein), were
previously audited, in accordance with generally accepted auditing
standards, by other auditors who expressed an unqualified opinion dated
January 23, 1995 (except with respect to the matters discussed in Note 14
as to which the date is February 13, 1995) on those financial statements.
In our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1994, is fairly stated, in
all material respects, in relation to the consolidated balance sheet from
which it has been derived.
/s/ERNST & YOUNG LLP
Chicago, Illinois
October 30, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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