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 June 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 August 7, 1995, United Stationers Inc. had 5,648,935 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 21 pages with the Index to Exhibits appearing on
Page 21.
INDEX
PAGE
NUMBER
PART I - FINANCIAL INFORMATION
Important Explanatory Note 3
Condensed Consolidated Balance Sheets as of
June 30, 1995 and December 31, 1994. 4
Condensed Consolidated Statements of Operations
for the Three Months Ended June 30, 1995
and 1994 and the Six Months Ended
June 30, 1995 and 1994. 5
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1995 and 1994. 7
Notes to Condensed Consolidated Financial Statements. 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations. 14
PART II - OTHER INFORMATION 19
SIGNATURE 20
INDEX TO EXHIBITS 21
-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.
Therefore, the financial information for the quarter ended June 30, 1995,
reflects the combined results of the Company and Associated. The six month
information for Fiscal 1995 reflects Associated only results for the first
quarter and combined results of the Company and Associated for the second
quarter. The quarter and six months ended June 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)
June 30, December 31,
1995 1994
CURRENT ASSETS
Cash and cash equivalents $ 12,514 $ 1,849
Accounts receivable, net 229,677 45,139
Inventories 338,171 88,197
Other current assets 37,438 3,795
Total Current Assets $617,800 $138,980
PROPERTY, PLANT AND EQUIPMENT, at cost $237,648 $ 58,277
Less-Accumulated depreciation and amortization (20,526) ( 12,830)
Net Property, Plant and Equipment $217,122 $ 45,447
GOODWILL, NET $ 73,421 $ 4,948
OTHER ASSETS, NET $ 40,443 $ 3,104
TOTAL ASSETS $948,786 $192,479
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt and current maturities
of long-term obligations $ 24,614 $ 5,901
Accounts payable 163,587 54,351
Accrued liabilities 134,889 22,274
Total Current Liabilities $323,090 $ 82,526
DEFERRED TAXES $ 30,722 $ 2,060
LONG-TERM OBLIGATIONS:
Senior Revolver Loan $135,708 $ 39,910
Senior Subordinated Notes 150,000
Senior Term Loan - Tranche A 100,378 6,000
Senior Term Loan - Tranche B 71,353 9,557
Other Long-Term Debt 32,142
Other Long-Term Liabilities 20,169 2,812
TOTAL LONG-TERM OBLIGATIONS $509,750 $ 58,279
REDEEMABLE PREFERRED STOCK $ 24,345 $ 23,189
REDEEMABLE WARRANTS $ 11,984 $ 1,650
STOCKHOLDERS' EQUITY $ 48,895 $ 24,775
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $948,786 $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
June 30, June 30,
1995 1994 *
NET SALES $535,331 $109,979
COST OF GOODS SOLD 414,953 82,109
Gross profit $120,378 $ 27,870
OPERATING EXPENSES:
Warehousing, marketing and
administrative expenses $102,570 $ 25,006
Income from operations $ 17,808 $ 2,864
INTEREST EXPENSE, net 15,266 1,996
Income before income taxes $ 2,542 $ 868
INCOME TAXES 1,017 334
NET INCOME $ 1,525 $ 534
PREFERRED STOCK DIVIDENDS ISSUED
AND ACCRUED 583 543
Net income (loss) attributable to
common shareholders $ 942 $ (9)
Net Income (Loss) Per Common and
Common Equivalent Share (Primary and
Fully Diluted) $0.14 $0.00
Average Number of Common Shares Used
in Primary Calculation 6,919,816 3,290,897
Average Number of Common Shares Used
in Fully Diluted Calculation 6,919,816 3,290,897
* 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 SIX MONTHS ENDED
June 30, June 30,
1995 1994 *
NET SALES $672,603 $233,829
COST OF GOODS SOLD 518,521 176,271
Gross profit $154,082 $ 57,558
OPERATING EXPENSES:
Warehousing, marketing and
administrative expenses $131,519 $ 51,440
Restructuring charge (Note 1) 9,759
Total operating expenses $141,278 $ 51,440
Income from operations $ 12,804 $ 6,118
INTEREST EXPENSE, net 17,469 4,046
Income (loss) before income taxes
and extraordinary item $ (4,665) $ 2,072
INCOME TAXES (BENEFIT) (1,956) 796
Income (loss) before extraordinary
item $ (2,709) $ 1,276
EXTRAORDINARY ITEM - loss on early retire-
ment of debt, net of taxes ($967) (Note 1) (1,449)
NET INCOME (LOSS) $ (4,158) $ 1,276
PREFERRED STOCK DIVIDENDS ISSUED
AND ACCRUED 1,156 1,077
Net income (loss) attributable to
common shareholders $ (5,314) $ 199
Net Income (Loss) Per Common and
Common Equivalent Share (Primary and
Fully Diluted):
Income (loss) before extraordinary item $ (.83) $ .05
Extraordinary item (.31)
Net income (loss) per common and
common equivalent share $(1.14) $ .05
Average Number of Common Shares Used
in Primary Calculation 4,676,887 4,091,822
Average Number of Common Shares Used
in Fully Diluted Calculation 4,676,887 4,136,895
* 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 SIX MONTHS ENDED
June 30, June 30,
1995 1994 *
CASH FLOWS FROM OPERATING ACTIVITIES:
Net cash provided by operating
activities $ 49,121 $15,512
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of the Company - net of cash
acquired of approximately $14,500 $(258,274) $
Capital expenditures (1,559) (336)
Net cash used in investing activities $(259,833) $ (336)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of debt $ 686,789 $
Retirements and payments of debt (398,903) (2,000)
Net repayment under revolver (52,900) (12,500)
Financing costs (25,288)
Issuance of common stock 12,000
Other (321) (355)
Net cash provided by (used in) financing
activities $ 221,377 $(14,855)
NET CHANGE IN CASH $ 10,665 $ 321
Cash and Cash Equivalents, beginning of period 1,849 991
Cash and Cash Equivalents, end of period $ 12,514 $ 1,312
Other Cash Flow Information
Cash payments during the six month period for:
Income taxes paid $ 3,824 $ 804
Interest paid 11,571 3,342
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.
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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 Shares for no additional consideration.
To finance the Offer, refinance existing debt of ASI, the Company and USSC,
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 $293.4 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 $68.9 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 June 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 quarter ended
June 30, 1995. The Condensed Consolidated Statements of Operations and Cash
Flows for Fiscal 1994 reflect Associated only.
The actual results for the six months ended June 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 June 30, 1995, approximately 20
employees have been terminated with the related benefits of approximately $0.2
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 June 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 six months ended June 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 six
months ended June 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 operating data for the six months
ended June 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 consolidated
basis. 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 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 quarterly
cost savings of $6.5 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)
Six Months Ended
(In thousands of dollars, except June 30
share data) (unaudited) 1995 1994
Net sales $1,122,501 $971,079
Net income $ 14,829 $ 5,065
Preferred stock dividends
issued and accrued $ 883 $ 795
Net income attributable to
common stockholders $ 13,946 $ 4,270
Net income per common and
common equivalent share:
Primary $ 2.50 $ 1.04
Fully diluted $ 2.50 $ 1.03
Weighted average number of
common shares outstanding:
Primary 5,576,129 4,091,822
Fully diluted 5,578,523 4,136,895
EBITDA (1) $ 70,712 $ 48,576
(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. EBITDA
includes a LIFO charge of $2.2 million and $1.6 million for the six months
ended June 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 believes 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 $2.2
million ($1.3 million net of tax benefit) or $0.28 per common and common
equivalent share for the six months ended June 30, 1995. The change to pre-tax
income was approximately $1.7 million ($1.0 million net of tax benefit) or
$0.14 per common and common equivalent share for the three months ended June
30, 1995. 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 prior-year amounts have been reclassified to conform with
current-year presentations. 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 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.
-12-
UNITED STATIONERS INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(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 second quarter of 1995 and 1994 and the six
months ended June 30, 1994 on a primary and fully diluted basis are computed
using the weighted average number of shares outstanding adjusted for the effect
of stock options and warrants considered to be dilutive common stock
equivalents. For the six months ended June 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.
(6) Subsequent Event
On July 28, 1995, the Company repurchased all the Series B preferred stock,
6,724.4 shares. The repurchase price was $7.0 million.
-13-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
In order to make appropriate comparisons and facilitate a more meaningful
discussion, the actual results for the second quarter of 1995 are compared to
the historical pre-Merger combined results of the Company and Associated for
the prior year. The actual results for the first six months (which reflect pre-
Merger Associated only for the first quarter and the post-Merger Company for
the second quarter) are compared to the 1994 historical pre-Merger results for
Associated only for the first quarter and the Company and Associated combined
for the second quarter. The combined pre-Merger results are reflected on a
historical cost basis of accounting and exclude the estimated cost savings,
increased depreciation expense and goodwill amortization, increased interest
expense and lower preferred stock dividends included in the post-Merger results
and reflected in the Pro Forma financial information included in Note 1 to the
Consolidated Financial Statements and, therefore, are not directly comparable
to the post-Merger results.
First Quarter Restructuring Charge
The actual results for the six months ended June 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 June 30, 1995, approximately 20
employees have been terminated with the related benefits of approximately $0.2
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 June 30, 1995, no amounts have
been charged against the reserve.
The actual results for the six months ended June 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 six
months ended June 30, 1995 include compensation expense relating to an increase
in employee stock options of approximately $1.5 million ($0.9 million net of
tax benefit) as a result of the Acquisition and Merger.
-14-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Second Quarter Results - Second Quarter 1995 Actuals Versus
Second Quarter 1994 Pre-Merger Combined Results
Net sales were $535.3 million for the second quarter of 1995, compared with
$467.2 million in the pre-Merger combined year ago quarter, an increase of
14.6%. The growth in net sales is primarily the result of increases in unit
volume rather than changes in price.
Gross profit as a percent of net sales was 22.5% in the second quarter of 1995,
down from 22.8% in the pre-Merger combined second quarter of 1994. The lower
margin rate reflects a shift in product mix.
Operating expenses as a percent of net sales were 19.2% in the second quarter
of 1995 compared with 21.1% in the pre-Merger combined second quarter of 1994.
This decrease was primarily a result of increased operating efficiencies and
improved productivity.
Income from operations as a percent of net sales was 3.3% in the second quarter
of 1995 compared with 1.7% in the pre-Merger combined second quarter of 1994.
Interest expense as a percent of net sales was 2.8% in the second quarter of
1995 compared with 1.0% in the pre-Merger combined year ago quarter. The
increase reflects additional debt needed to consummate the Merger.
Income before income taxes as a percent of net sales was 0.5% in the second
quarter of 1995 compared with the pre-Merger combined year ago quarter of 0.7%.
Net income was $1.5 million in the second quarter of 1995 compared with $2.3
million in the pre-Merger combined second quarter of 1994. Net income
attributable to common shareholders was $0.9 million in the second quarter of
1995 compared with $1.7 million in the pre-Merger combined year ago quarter.
Six Month Results - Six Month 1995 Actuals Versus
Six Month 1994 Pre-Merger Combined Results
Net sales were $672.6 million for the first six months of 1995, compared with
$591.0 million in the pre-Merger combined year ago period, an increase of
13.8%. The growth in net sales is primarily the result of increases in unit
volume rather than changes in price.
Gross profit as a percent of net sales was 22.9% in the first six months of
1995 compared with 23.1% in the pre-Merger combined first six months of 1994.
The lower margin rate reflects a shift in product mix.
Operating expenses as a percent of net sales was 21.0% for the first six months
of 1995 compared with 21.2% for the pre-Merger combined period a year ago. The
first six months of 1995 include the impact of a $9.8 million Merger-related
restructuring charge in the first quarter of 1995.
-15-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Six Month Results (Continued)
Operating expenses as a percent of net sales before the restructuring charge
were 19.6% in the first six months of 1995. The decrease in operating expenses
as a percent of net sales before the restructuring charge is the result of
increased operating efficiencies and improved productivity.
Income from operations as a percent of net sales was 1.9% in the first six
months of 1995 (after the restructuring charge) and 1.9% in the pre-Merger
combined period a year ago.
Interest expense as a percent of net sales was 2.6% in the first six months of
1995 compared with 1.1% in the pre-Merger combined first six months of 1994.
The increase reflects additional debt needed to consummate the Merger.
Income (loss) before income taxes and extraordinary item as a percent of net
sales was a negative 0.7% in the first six months of 1995 compared with a
positive 0.8% in the pre-Merger combined first six months of 1994. Income
(loss) before extraordinary item and preferred dividends was a negative $2.7
million in the first six months of 1995 compared with a positive $3.0 million
in the pre-Merger combined first six months of 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.
Net income (loss) was a negative $4.2 million in the first six months of 1995
compared with a positive $3.0 million in the pre-Merger combined period a year
ago. Net income (loss) attributable to common shareholders was a negative $5.3
million in the first six months of 1995 compared with a positive $2.0 million
in the pre-Merger combined period a year ago.
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.
-16-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Liquidity and Capital Resources (Continued)
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) will be due on the last day of each of the first four
calendar quarters commencing with the quarter ending 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) will be due on the last
day of each of the first twenty calendar quarters commencing with the quarter
ending June 30, 1995. The remaining eight installments in the aggregate
principal 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.
-17-
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(CONTINUED)
Liquidity and Capital Resources (Continued)
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 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
Merger Preferred Stock (as hereinafter defined) 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 Merger
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 Merger
Preferred Stock when such dividends become due and payable in kind (rather than
in cash) for the foreseeable future.
-18-
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
-19-
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: August 9, 1995 /s/Daniel H. Bushell
Executive Vice President and
Chief Financial Officer
-20-
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: August , 1995
Daniel H. Bushell
Executive Vice President and
Chief Financial Officer
-20-
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
-21-
UNITED STATIONERS INC. AND SUBSIDIARIES
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. In the event the necessary consents are
obtained, the Company is permitted to redeem the Series B Preferred Stock
(approximately $7.0 million).
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 $293.4 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 $66.7 million has been recorded as goodwill
and is being amortized on a straight-line basis over 40 years.
Effective for 1995, the Company changed its fiscal year from a year-end of
August 31 to December 31. A report on Form 8-K was filed on April 26, 1995,
reporting that the Company had changed its fiscal year end to December 31. A
Form 10-K will be filed by the Company by June 28, 1995 which will include
audited financial statements for the period from September 1, 1994 through
March 30, 1995, the date on which the Merger was consummated.
The Condensed Consolidated Balance Sheet combines Associated and the Company as
of March 31, 1995 and reflects a preliminary allocation of the purchase price
which may be revised at a later date. The Condensed Consolidated Balance Sheet
as of December 31, 1994 reflects Associated only. The Condensed Consolidated
Statements of Operations reflects the results of operations for Associated only
for the three months ended March 31, 1995 and March 31, 1994. The Condensed
Consolidated Statement of Cash Flows for the three months ended March 31, 1995
and March 31, 1994 reflects that of Associated only, including the effects of
the Acquisition and Merger.
-8-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5 SUBSEQUENT EVENT
On May 3, 1995, USSC completed the issuance of $150.0
million of Notes. 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
working capital. In the event the necessary consents are
obtained, the Company is permitted to redeem the Series B
Preferred Stock (approximately $7.0 million).
The Notes are unconditionally guaranteed on a senior
subordinated basis (the "Guarantees") by the Company and any
future domestic Restricted Subsidiary (as defined) of the
Company.
Interest on the Notes will be payable semiannually on
May 1 and November 1 of each year, commencing November 1, 1995.
The Notes are redeemable at the option of USSC, in whole or in
part, at any time on or after May 1, 2000 at the redemption
prices set forth in the Indenture, together with accrued and
unpaid interest, if any, to the date of redemption. In
addition, on or prior to May 1, 1998, USSC may redeem up to
$50.0 million principal amount of the Notes with the proceeds of
one or more Public Equity Offerings (as defined) at 112.75% of
the aggregate principal amount thereof, together with accrued
and unpaid interest, if any, to the date of redemption; provided
that Notes having an aggregate principal amount of at least
$100.0 million remain outstanding immediately after any such
redemption. Upon the occurrence of a Change of Control (as
defined), each holder of the Notes may require USSC to
repurchase all or a portion of such holder's Notes at 101% of
the principal amount thereof, together with accrued and unpaid
interest, if any, to the date of repurchase.
The Notes and the Company's Guarantees are
subordinated to all Senior Indebtedness (as defined) of USSC and
Senior Guarantor Indebtedness (as defined) of the Company,
respectively.
-17-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5 SUBSEQUENT EVENT (CONTINUED)
The Indenture contains certain covenants, including
limitations on the incurrence of indebtedness, the making of
restricted payments, transactions with affiliates, the existence
of liens, disposition of proceeds of asset sales, the making of
guarantees by restricted subsidiaries, transfers and issuances
of stock of subsidiaries, the imposition of certain payment
restrictions on restricted subsidiaries and certain mergers and
sale of assets.
The Notes have been designated as eligible for trading
in the PORTAL Market.
The Company and USSC have agreed to use their best
efforts to file a registration statement with the Securities
Exchange Commission under the Securities Act of 1993 with
respect to a registered offer to exchange the Notes for similar
notes (the "Exchange Offer"). The Exchange Offer is to be
consummated within 150 days of the original issue date of the
Notes. If certain events are not completed within the
prescribed timetable for the consummation of the Exchange Offer,
the interest rate borne by the Notes shall be increased, not to
exceed one-half of one percent per annum, until the completion
of such events.
ITEM 5 OTHER INFORMATION - HISTORICAL SUMMARY FINANCIAL
INFORMATION
The following historical financial information of the
Company and its subsidiaries and Associated and its subsidiaries
has been included for reference purposes.
-18-
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-
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K (CONTINUED)
(b) A report on Form 8-K was filed on February 13, 1995,
reporting that the Company had entered into the Merger Agreement
with Associated.
The following Form 8-K's were filed subsequent to the
end of the quarter:
A report on Form 8-K was filed on April 14, 1995, reporting a
change in control, which included audited financial statements
of the Company and its subsidiaries for the fiscal year ended
August 31, 1994 and unaudited financial statements for the six
months ended February 28, 1995, audited financial statements
of Associated and its subsidiaries for the fiscal year ended
December 31, 1994, and unaudited pro forma financial
information based on historical financial information of
Associated and the Company as of December 31, 1994.
A report on Form 8-K was filed on April 26, 1995, reporting
that the Company changed its fiscal year end from August 31 to
December 31 and that the Company's Board of Directors
appointed Ernst & Young LLP as independent accountants to
replace Arthur Andersen LLP.
-23-
Exhibit 15
INDEPENDENT ACCOUNTANT'S REVIEW REPORT
The Board of Directors
United Stationers Inc.
We have reviewed the accompanying condensed consolidated balance sheet and
the related condensed consolidated statements of operations and cash flows
of United Stationers Inc. (previously doing business as Associated
Holdings, Inc.) and subsidiary as of June 30, 1995, and the related
condensed consolidated statements of operations for the three-month and six-
month periods ended June 30, 1995, and the condensed consolidated statement
of cash flows for the six-month period ended June 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 June 30, 1995, and for the three-month and six-month periods
then ended 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
August 7, 1995
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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