Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
(Mark One)
r ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the period September 1, 1994 through March 30, 1995
Commission file number 0-10653
UNITED STATIONERS INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3141189
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2200 East Golf Road 60016-1267
Des Plaines, Illinois (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (708) 699-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on
which registered
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of Class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
As of March 30, 1995, 18,596,582 shares of common stock were
outstanding, and the aggregate market value of the shares of common stock
held by nonaffiliates (based on the last sale price of such shares as
quoted by NASDAQ on March 30, 1995) was approximately $39,971,121.
UNITED STATIONERS INC. AND SUBSIDIARY
FORM 10-K TRANSITION REPORT FOR THE PERIOD
SEPTEMBER 1, 1994 THROUGH MARCH 30, 1995
Contents and Cross Reference Sheet
Furnished Pursuant to General Instruction G(4) of Form 10-K
Form 10-KForm 10-K Form 10-K
Part No. Item No. Description
Page No.
Important Explanatory Note 1
I 1 Business 1
General 1
Products 2
Customers 2
Marketing and Sales 2
Distribution 3
Competition 4
Employees 4
Canadian Operations 4
Hong Kong Trading Office 4
2 Properties 4
Executive Offices 4
Regional Distribution Centers 4
Local Distribution Points 5
Canadian Facility 5
Hong Kong Trading Office 5
3 Legal Proceedings 5
4 Submission of Matters to a Vote of Security Holders 5
Executive Officers of the Registrant 6
II 5 Market for Registrant's Common Equity and
Related Stockholder Matters 7-8
6 Selected Financial Data 9
7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-13
8 Financial Statements and Supplementary Data 14-35
9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 36
III 10 Directors 37-38
11 Executive Compensation 39-40
12 Security Ownership of Certain Beneficial Owners
and Management 41
13 Certain Relationships and Related
Transactions 42
IV 14 Exhibits, Financial Statements, Schedules, and
Reports on Form 8-K 43-48
Signatures 49
PART I
IMPORTANT EXPLANATORY NOTE
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". 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.
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. This Transition Report on Form 10-K is being filed by the
Company due to the cessation for accounting purposes of the Company as of
March 30, 1995. The Form 10-K includes the final audited financial
statements of the Company through the date of cessation for the period
September 1, 1994 through March 30, 1995. The following information
reflects the Company prior to the Merger unless otherwise noted. The
financial statements included in this filing reflect the Company's
historical financial statements only, prior to the Merger, including the
impact of certain merger-related costs.
References to Fiscal 1995 included in this document refer to the
transition period from September 1, 1994 through March 30, 1995. The
fiscal years of 1994, 1993 and 1992 reflect twelve months ended August 31.
The unaudited Pro Forma Combined Financial Statements for the merged
companies for the year ended December 31, 1994 were included in the
Company's Form 8-K dated April 14, 1995. See Note 1 to the Consolidated
Financial Statements.
ITEM 1. BUSINESS
General
United Stationers Inc. is the parent company for its direct wholly owned
subsidiary, United Stationers Supply Co. Except where the context clearly
indicates otherwise, the terms "Company" or "United Stationers" as
hereinafter used include United Stationers Inc. together with its
subsidiary.
United Stationers Supply Co. was incorporated in 1922 under the name
Utility Supply Co. and has operated under its present name since 1960.
United Stationers Supply Co. serves office products dealers, office
products superstores, mail order houses, specialty retail stores, mass
merchandisers, and sanitary supply distributors. Its MicroUnited division,
which distributes computer products, primarily serves computer products
resellers, computer superstores, national computer store chains, and mail
order houses. Its furniture division distributes primarily to office
furniture dealers.
On June 24, 1992, United Stationers Supply Co. acquired Stationers
Distributing Company ("SDC"), a privately held wholesaler of office
products based in Fort Worth, Texas with annual revenues of more than $400
million. SDC was immediately merged into United Stationers Supply Co.
The Company sells its products through a single national distribution
network to more than 14,000 resellers, who in turn sell directly to end
users. These products are distributed substantially within 24 hours
through a computer-based network of warehouse facilities and truck fleets
radiating from 58 distribution points. For the Fiscal 1995 transition
period, no single dealer accounted for more than 4% of the Company's
consolidated net sales. The Company's annual net sales to individual
dealers represent only a portion of each dealer's total purchases from all
sources.
Products
The Company is engaged in the wholesale distribution of a broad line of
business products to more than 14,000 resellers. The Company distributes
approximately 25,000 items, including: traditional office supplies; office
furniture and desk accessories; office machines, equipment and supplies;
and computer hardware, peripherals and supplies; and facilities management
supplies such as safety and sanitation items.
The Company's products are purchased from approximately 500
manufacturers. The Company has distribution contracts with certain
suppliers, under which the Company's obligations to each individual
supplier is not material. For the Fiscal 1995 transition period, no single
supplier accounted for more than 11.5% of the total dollar amount of the
Company's purchases. The Company historically has purchased on a purchase
order basis.
Customers
United Stationers serves all segments of the office products, office
furniture and computer reseller markets. In addition, the Company now
serves sanitary supply distributors. The Company offers a menu of programs
and services designed to meet the diverse needs of each of these customer
categories.
The mainstay of the office products industry continues to be commercial
dealers who typically serve large companies, institutions and government
agencies. Through consolidation, these dealers are getting larger and
becoming even more important to the Company. Commercial dealers remain one
of United Stationers' fastest growing customer classes.
The independent dealer population has been declining for some time,
especially as dealerships are acquired and brought under an umbrella of
common ownership. However, many independent office products dealers
continue to thrive, adapting to the highly competitive environment with the
help of resources the Company offers.
Some independent dealers have joined forces in marketing and/or buying
groups. United Stationers is the leading wholesale source for many of
these groups, providing not only merchandise but also special programs that
enable these dealers to utilize their combined strengths.
While United Stationers maintains and builds its business with these
traditional dealers, the Company has also initiated programs with major
office products superstore chains. The Company has placed catalog order
stations in some of these stores, providing consumers the opportunity to
order items that superstores do not typically stock.
Through its furniture division, United Stationers offers middle-grade
office furniture to both office products and office furniture dealers. The
Company also provides computer-related products to all categories of
computer resellers through its MicroUnited division. The Company provides
marketing materials and professional expertise to meet the various needs of
these resellers.
Marketing and Sales
The Company concentrates its marketing efforts on providing value-added
services to resellers within the business products industry. The Company
distributes products that are generally available at similar prices from
multiple sources, and most of its customers purchase their products from
more than one source. As a result, the Company differentiates itself
through broad product selection, a high degree of product availability, a
variety of customer services and expeditious distribution capabilities.
The Company's significant inventories and its advanced distribution system
enable each of the Company's customers to provide a high level of service
to end users while minimizing the reseller's own inventory requirements.
The Company maintains sufficient inventory levels to ship from stock more
than 90% of all items ordered.
In addition to emphasizing its broad product line, extensive inventory,
computer integration and national distribution capabilities, the Company's
marketing programs have relied upon two additional major components.
First, the Company produces catalogs that are usually custom imprinted with
each dealer's name. These catalogs are sold to dealers who, in turn,
distribute the catalogs to their customers. Second, the Company provides
its dealers with a variety of services, including business management
systems, promotional programs and price updating services.
The Company produces numerous catalogs for placement with dealers' end-
user customers, including: an annual General Line Catalog listing 22,000
items; an annual office furniture catalog featuring furniture and
accessories; a quarterly Concept 2000 catalog offering approximately 1,000
high-volume commodity products; an annual Universal catalog promoting the
Company's private-brand merchandise; an annual Computer Products Catalog
offering hardware, peripherals and supplies; an annual Computer Concepts
catalog; an annual Facilities Management Supply catalog featuring
janitorial and sanitation supplies and ergonomic products; a business
presentation products catalog; and Access, a new promotional catalog.
An office products dealer typically distributes only one wholesaler's
catalogs. The dealer will often purchase products to meet customers'
orders from the wholesaler that provided the catalogs. Consequently, the
Company attempts to maximize the distribution of its catalogs and,
therefore, offers a rebate and allowance program that can offset the
purchase price of most catalogs. In addition, the Company provides a
variety of dealer support and marketing programs that are designed to
create orders for dealers from their end-user customers throughout the
year.
The Company began to focus on niche markets in Fiscal 1991 and has
expanded steadily upon this concept since then. A furniture division was
established to offer national delivery and set up capabilities to office
products dealers as well as to attract new furniture dealers. Other niche
markets include computer-related products, custom-imprinted items, facility
management supplies and business presentation products.
The Company offers its dealers promotional programs at various times
throughout the year. These programs offer retailers special prices on
certain brand-name and private-brand merchandise along with packaged
promotional materials, including newspaper and direct mail flyers. In
addition, a support program is offered to help dealers develop their market
through direct mail techniques.
To help inform dealers of price changes, the Company offers various price
updating services in hard copy and computer media formats. The Company
publishes a pricing guide listing manufacturers' suggested retail prices.
For computer updating, the Company provides its price files on diskettes
and tapes as well as through on-line access.
The Company offers its dealers a range of electronic order entry and
business management systems. The Company benefits by gaining an increasing
share of the dealers' business, while the dealers benefit through better
control and administration of their business. The Company's most
sophisticated electronic management system enables dealers to manage
critical business functions including order entry, purchasing, pricing,
accounts receivable, accounts payable and inventory control. In July 1993,
United Stationers entered into a joint venture, creating a new corporation
called United Business Computers, Inc. to enhance, market and support this
system. Other systems are linked to the Company's computer network through
dedicated or dial-up lines. These systems allow instant stock checks and
order entry for the approximately 25,000 items offered by the Company.
Distribution
The Company has a national network of 58 distribution points that
generally enables the Company to make its entire product line available to
the customer within 24 hours of order placement. Each of the Company's 30
Regional Distribution Centers carries most of the Company's full line of
inventory. The Company supplements its Regional Distribution Centers with
Local Distribution Points throughout the United States that serve as will-
call and reshipment points for orders filled at the Regional Distribution
Centers. The Company's truck fleet allows direct delivery from the
Regional Distribution Centers and Local Distribution Points to the dealers.
The Company's computerized systems enable orders to be taken at any
Regional Distribution Center and filled from that or any other Regional
Distribution Center. Dealers may elect to pick up their orders at the
Regional Distribution Center or choose to have them shipped from the
Regional Distribution Center to the dealer or directly to the dealer's
customer. The merchandise may also be shipped to the Local Distribution
Point that is closest to the dealer (or the dealer's customer) for will-
call, local delivery or reshipment.
The Company's ability to readily deliver its products can be impaired by
work stoppages by its employees. Although the Company has maintained
service levels during past work stoppages by distributing to its customers
from unaffected distribution centers, profitability has been reduced during
such periods as a result of higher distribution costs. The Company's
service levels would also be affected in the event of an interruption in
operation of its computers and/or telecommunications network on a company-
wide scale for an extended period of time. The Company has developed
contingency plans to limit its exposure. As the number of the Company's
distribution centers increases, the operation of any one distribution
center becomes less significant in relation to the overall operation of the
Company.
Competition
The Company competes with office products manufacturers as well as other
wholesale distributors of business products. Most wholesale distributors
conduct operations regionally and locally, sometimes with limited product
lines such as writing instruments or computer products. Other wholesalers,
including the Company, carry a full line of business products.
Manufacturers typically sell their products through a variety of
distribution channels, including business products wholesalers and
resellers. Manufacturers have traditionally been viewed as both suppliers
to and competitors of wholesalers.
Competition between the Company and manufacturers is based primarily upon
net pricing, minimum order quantity and product availability. Although
manufacturers may provide lower prices to dealers than the Company does,
the Company's marketing and catalog programs, combined with speed of
delivery and its ability to offer dealers a broad line of business products
with lower minimum order quantities, are important factors in enabling the
Company to compete effectively. Competition between the Company and other
wholesalers is based primarily on net pricing to dealers, breadth of
product lines, availability of products and other services, speed of
delivery to dealers, and the quality of its services. The Company believes
it is competitive in each of these areas.
Employees
At March 30, 1995, the Company employed approximately 3,600 persons. The
Company considers its relationships with its employees to be satisfactory.
Approximately 850 shipping, warehouse and maintenance employees at the
Chicago, Detroit, Philadelphia, Baltimore, Los Angeles, Minneapolis and New
York City facilities are covered by various collective bargaining
agreements. These agreements expire at various times during the next three
years.
Canadian Operations
In April 1991, United Stationers Canada Ltd. was formed as a subsidiary
of United Stationers Supply Co., serving Canadian office products dealers
on a limited basis. This subsidiary was liquidated on August 31, 1994.
Canadian dealers are being served through the Company's Detroit, Seattle
and Portland Regional Distribution Centers.
Hong Kong Trading Office
In 1992, United Stationers Hong Kong Limited and United Worldwide Limited
were formed as subsidiaries of United Stationers Supply Co. to facilitate
global sourcing of products.
ITEM 2. PROPERTIES
The Company considers its properties to be suitable and adequate for
their intended uses. These properties consist of the following:
Executive Offices
The Corporate office facility in Des Plaines, Illinois has approximately
128,000 square feet of office and storage space. In September 1993,
approximately 47,000 square feet of office space located in Mount Prospect,
Illinois was leased by the Company. This lease expires in five years, with
an option to renew for two five-year terms.
Regional Distribution Centers
The Company operates 30 Regional Distribution Centers located in the
metropolitan areas of Chicago (Forest Park, Illinois); Detroit (Livonia,
Michigan); Philadelphia (Pennsauken, New Jersey); Dallas, Texas; Boston
(Woburn, Massachusetts); Los Angeles (The City of Industry, California);
Atlanta (Norcross, Georgia); Baltimore (Harmans, Maryland); Cleveland
(Twinsburg, Ohio); Minneapolis (Eagan, Minnesota); New York City (Edison,
New Jersey); St. Louis (Greenville, Illinois); Albany (Coxsackie, New
York); Portland, Oregon; Phoenix (Tempe, Arizona); Sacramento, California;
Salt Lake City, Utah; Seattle (Tukwila, Washington); Denver, Colorado;
Houston, Texas; Lubbock, Texas; San Antonio, Texas; Tulsa, Oklahoma;
Charlotte, North Carolina; Kansas City, Missouri; Memphis, Tennessee;
Nashville, Tennessee; New Orleans (Harahan, Louisiana); Cincinnati
(Springdale, Ohio); and
Ft. Lauderdale, Florida.
These facilities represent total square footage of nearly six million
square feet, of which 3.3 million is owned and the balance is leased.
Local Distribution Points
The Company also operates 28 Local Distribution Points. Two are leased
by the Company; the other Local Distribution Points are operated through
cross-docking arrangements with third party distribution companies.
Canadian Facility
The Company currently leases one facility in Woodbridge, Ontario (7,000
sq. ft.). This lease expires August 31, 1995 with an option to renew for
one additional year.
Hong Kong Trading Office
United Stationers Hong Kong Limited leases 1,500 square feet of office
space in Hong Kong with the lease expiring on October 14, 1995.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings arising in the ordinary
course of business. The Company is not involved in any legal proceedings
that it believes will result, individually or in the aggregate, in a
material adverse effect upon its financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders through the
solicitation of proxies from March 1, 1995 through March 30, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information is included herein in accordance with General
Instruction G(3) to Form 10-K. For the transition period, the Company's
executive officers were as follows:
Name Age * Position
Joel D. Spungin (1) 57 Chairman of the Board of
Directors and Chief Executive
Officer
Jeffrey K. Hewson (2) 51 President and Chief Operating Officer and a
Director
Allen B. Kravis (3)58 Senior Vice President and Chief Financial Officer
Steven R. Schwarz 41 Senior Vice President, Marketing
Robert H. Cornell 55 Vice President, Human Resources
Otis H. Halleen (4)60 Vice President, Secretary and General Counsel
Jerold A. Hecktman57 Vice President, Advertising and a Director
James A. Pribel 41 Treasurer
Ted S. Rzeszuto 42 Vice President and Controller
Ergin Uskup 57 Vice President, Management
Information Systems and
Chief Information Officer
* as of March 30, 1995
(1) Mr. Spungin resigned as Chairman of the Board of Directors and Chief
Executive Officer as of March 20, 1995. Mr. Spungin remained as a member
of the Board of Directors.
(2) On May 31, 1995, Mr. Hewson resigned as President and Chief
Executive Officer of the Company. Mr. Hewson remained as a member of the
Board of Directors.
(3) On February 1, 1995, Mr. Kravis resigned as Senior Vice President
and Chief Financial Officer
(4) On April 1, 1995, Mr. Halleen resigned as Vice President, Secretary
and General Counsel.
All of the executive officers listed above, except Mr. Hewson,
Mr. Kravis, Mr. Schwarz, Mr. Pribel and Mr. Uskup have been employed by the
Company in similar capacities for more than the past five years.
Mr. Hewson, prior to his election as President and Chief Operating
Officer in April 1991, had been Executive Vice President of the Company
since March 1990. Prior to that, he had been President of ACCO
International's U.S. Division since 1989 and President of its Canadian
Division since 1987. ACCO International is a manufacturer of traditional
office products and a subsidiary of American Brands. American Brands is a
global consumer products holding company.
Mr. Kravis, prior to his election as Senior Vice President and Chief
Financial Officer in September 1992, had been Senior Vice President, Chief
Financial Officer and Treasurer since May 1991. He had been Vice President
and Treasurer of the Company since 1981.
Mr. Schwarz, prior to his election as Senior Vice President, Marketing in
June 1992, had been Senior Vice President, General Manager, MicroUnited
since 1990 and Vice President, General Manager, MicroUnited since September
1989. He had held a staff position in the same capacity since February
1987.
Mr. Pribel, prior to his election as Treasurer in September 1992, had
been Assistant Treasurer of the Company since 1984.
Mr. Uskup, prior to his election as Vice President, Management
Information Systems and Chief Information Officer in February 1994, had
been since 1987 Vice President, Corporate Information Services for Baxter
International Inc., a global manufacturer and distributor of health care
products.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Quarterly Financial Data1 (in thousands of dollars, except share data) Unaudited
United Stationers Inc. and Subsidiary
Gross NetNet IncomeDividends Wtd. Avg.
Net Profit Income (Loss) Paid Shares
Saleson Sales (Loss)Per SharePer Share 3 Outstanding
Seven Months Ended March 30, 1995
First Quarter$ 402,198$ 84,957$ 6,943$ 0.37 $0.1018,590,672
Second Quarter 431,640 90,629 7,362 0.40 0.1018,595,600
Month of March 2146,737 31,132(21,539) (1.16) 0.1018,596,582
Totals 2 $ 980,575$206,718$ (7,234)$(0.39)$0.30 18,593,614
Year Ended Aug. 31, 1994
First Quarter$ 370,597$ 84,774$ 5,924 $0.32 $0.1018,582,939
Second Quarter369,988 82,560 3,844 0.21 0.10 18,587,082
Third Quarter360,02277,5412,235 0.12 0.10 18,588,828
Fourth Quarter372,41778,0263,746 0.20 0.10 18,590,226
Totals$1,473,024$322,901$15,749 $0.85 $0.40 18,587,282
Year Ended Aug. 31, 1993
First Quarter$ 365,321$ 81,824$ 5,111$0.28$0.10 18,539,129
Second Quarter378,81886,8095,573 0.30 0.10 18,555,082
Third Quarter365,79186,0564,826 0.26 0.10 18,567,498
Fourth Quarter360,18589,8305,850 0.31 0.10 18,576,370
Totals$1,470,115$344,519$21,360 $1.15 $0.40 18,559,600
1 Refer to accompanying financial statements and the notes thereto.
2 Reflects the impact of merger-related costs; See Note 1 to the Consolidated
Financial Statements.
3 The payment of dividends by the Company was restricted by financial covenants
of the Company's Credit Agreement as defined in Note 4 to the Consolidated
Financial Statements. The future payment of dividends by the Company is
restricted by financial covenants of the New Credit Facilities as described in
Note 1 to the Consolidated Financial Statements.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters (continued)
Quarterly Stock Price Data
United Stationers Inc.
Common Stock
Price Range
(Last Sale Price)
Seven Months Ended March 30, 1995Low High
First Quarter $ 9 1/4 10 1/2
Second Quarter 10 1/8 15 5/16
Month of March 15 1/4 16 5/8
Year Ended Aug. 31, 1994 Low High Shown to the left is
the
First Quarter $ 13 16 1/4 last sale price of
the
Second Quarter 12 7/8 15 3/4 Company's common
stock,
Third Quarter 10 3/4 15 1/4 quoted by NASDAQ.
The
Fourth Quarter 8 7/8 11 Company's common
stock is
Year Ended Aug. 31, 1993 Low High included in the
National
First Quarter $ 12 1/2 16 Market System of the
Second Quarter 15 1/2 20 National Association
of
Third Quarter 16 1/4 19 Securities Dealers,
Inc. The
Fourth Quarter 12 3/4 17 number of holders of
record
of the
Company's common
stock as of March 30,
1995 was 1,340.
Item 6. Selected Financial Data1 (in thousands of dollars, except share data)
United Stationers Inc. and Subsidiary
Seven Months
Ended Fiscal Year
Ended
For the Period EndedMarch 30, 1995Aug. 31, 1994Aug. 31, 1993Aug. 31, 1992
Aug. 31, 1991Aug. 31, 1990
Net Sales $980,575$1,473,024$1,470,115$1,094,275$951,109$993,178
Gross Profit on Sales206,718322,901 344,519 245,687 218,708 224,230
Operating Expenses 3201,801286,607 298,405 219,285 195,694 195,863
Income from Operations4,917 36,294 46,114 26,402 23,014 28,367
Income Taxes 4,692 10,309 15,559 8,899 7,008 8,523
Net Income (Loss) (7,234) 15,749 21,360 11,364 9,910 12,838
Net Income (Loss) Per Common Share (0.39) 0.85 1.15 0.71 0.64
0.83
Cash Dividends Declared and Paid Per Share0.30 0.40 0.40 0.40 0.40
0.40
Weighted Average Common Shares and
Common Share Equivalents Outstanding18,593,61418,587,28218,559,60016,088,450
15,518,654 15,494,772
Capital Expenditures -- Net 2 $ 7,764$ 10,499$ 29,958$ 8,291
$ 15,765 $ 15,067
As of Period End
Current Assets$ 532,915$ 435,791$442,471$ 422,033$ 277,229$ 268,375
Total Assets 711,839 618,550 634,786 601,465 409,958 401,661
Current Liabilities275,315 195,964 226,397 207,422 141,882 133,955
Working Capital 257,600 239,827 216,074 214,611 135,347 134,420
Long-term Obligations189,905159,149 156,208 156,276 68,867 73,122
Stockholders' Investment233,125246,010237,697223,387 181,584 177,777
Common Shares Outstanding 18,596,58218,590,22618,576,63418,536,92615,518,555
15,504,606
Book Value Per Share Outstanding$ 12.54$ 13.23$ 12.80 $
12.05 $ 11.70$ 11.47
1 Refer to accompanying financial statements and the notes thereto.
2 Includes capitalized leases.
3 Reflects the impact of merger-related costs for the seven months ended March
30, 1995; see Note 1 to the Consolidated Financial Statements.
UNITED STATIONERS INC. AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Transition Period - September 1, 1994 through March 30, 1995
Net sales were $980.6 million for the transition period
of 1995, a 12.5% increase from net sales of $871.6 million
in the comparable period a year ago. The increase primarily
reflects growth in unit volume.
Gross profit as a percent of net sales was 21.1% in the
transition period of 1995, compared with 22.5% in the
comparable year ago period. This lower margin rate reflects
a shift in product mix and is consistent with the margin
rate achieved in the latter half of Fiscal 1994 (twelve
months ended
August 31).
Operating expenses as a percent of net sales increased
to 20.6% in the transition period of 1995 from 19.6% in the
comparable period a year ago. The increase includes $27.8
million of merger-related costs consisting of employment
contracts; insurance benefits; legal, accounting and other
professional fees; stock options; and letter of credit fees
and other. Operating expenses as a percent of net sales
prior to the merger-related costs was 17.7% in 1995. This
decline from the comparable period in 1994 is a result of
savings in employee-related and freight-out expenses.
Income from operations as a percent of net sales was
.5% in the transition period of 1995, compared with 2.9% in
the comparable period in 1994. Income from operations as a
percent of net sales was 3.3% in 1995, excluding the merger-
related costs.
Other expense was $7.5 million in the transition period
of 1995, compared with $5.7 million in the year-ago period.
The increase was due to higher interest expense from
increased debt to meet working capital and other capital
expenditure needs and higher interest rates on borrowings.
Income (loss) before income taxes as a percent of net
sales was a loss of .3% in the transition period of 1995,
compared to income of 2.3% in the comparable period of 1994.
Net income (loss) was a loss of $7.2 million in 1995,
compared with income of $11.5 million in 1994. Net income
(loss) per share was a loss of $0.39 in 1995, compared with
income of $0.62 in 1994.
Fiscal 1994 Compared with Fiscal 1993
Net sales were $1.5 billion for Fiscal 1994, a 0.2%
increase over Fiscal 1993 reflecting a slight increase in
unit volume. Sales in the early part of Fiscal 1994 were
affected by a temporary drop in in-stock service levels and
the discontinuing of nearly 12,000 items as a final step in
the consolidation process of the June 1992 acquisition of
Stationers Distributing Company. Sales were also negatively
impacted by temporary, merger-related operational
disruptions in the west and southwest regions. Sales grew
in the fourth quarter by 3.4%, reversing the decline
experienced in the prior two quarters.
Gross margin decreased to 21.9% in Fiscal 1994 from
23.4% in Fiscal 1993. The decline primarily reflects higher
levels of rebates and volume allowances earned by the
Company's customers as a result of ongoing consolidations.
In addition, gross margin was affected by a LIFO charge (an
increase to "Cost of Sales") of $2.2 million in Fiscal 1994
versus LIFO income (a decrease to "Cost of Sales") of $4.7
million in Fiscal 1993, and a shift in product mix.
Operating expenses as a percent of net sales decreased
to 19.4% in Fiscal 1994 from 20.3% in Fiscal 1993. The
decrease is the result of streamlining the Company's work
processes and reducing payroll and freight expense.
Income from operations as a percent of net sales was
2.5% in Fiscal 1994, compared with 3.1% in Fiscal 1993.
Interest expense increased in Fiscal 1994 due primarily
to additional debt incurred to support working capital and
other capital expenditures. Income before income taxes
decreased by 29.4% from Fiscal 1993 to Fiscal 1994. Net
income per share was $0.85 for Fiscal 1994, a 26.1% decrease
from the $1.15 for Fiscal 1993.
Certain interim expense and inventory estimates are
recognized throughout the fiscal year relating to shrinkage,
inflation and product mix. The results of the year-end
close and physical inventory reflected a favorable
adjustment with respect to such estimates, resulting in
approximately $0.5 million of additional net income, which
is reflected in the fourth quarter of Fiscal 1994.
The effective tax rates for the fiscal years ending
August 31, 1994 and August 31, 1993 were 39.6% and 42.1%,
respectively. The decrease is primarily due to the
liquidation of a foreign subsidiary and a decrease in the
effective state income tax rate, offset by an increase in
the non-deductible losses in the Company's foreign operation
and the non-deductible amortization of goodwill.
Fiscal 1993 Compared with Fiscal 1992
Net sales were $1.5 billion for Fiscal 1993, a 34%
increase over net sales of $1.1 billion for Fiscal 1992.
This increase was due to an increase in sales volume
substantially attributable to the June 1992 acquisition of
Stationers Distributing Company.
Gross margin increased to 23.4% in Fiscal in Fiscal
1993 from 22.4% in Fiscal 1992, caused by LIFO income (a
decrease to "Cost of Sales") of $4.7 million in Fiscal 1993
versus a LIFO charge (an increase to "Cost of Sales") of
$2.7 million in Fiscal 1992 and a favorable product mix.
Operating expenses as a percent of net sales increased
to 20.3% in Fiscal 1993 from 20.0% in Fiscal 1992. This
increase was the result of higher expense levels associated
with offering a free-freight marketing program to customers
and costs related to temporarily managing the separate
product offerings of United Stationers and Stationers
Distributing. Also, delays in some of our merger-related
facilities consolidations resulted in additional expenses.
Income from operations as a percent of net sales was
3.1% in Fiscal 1993, compared with 2.4% in Fiscal 1992.
Interest expense increased in Fiscal 1993 due primarily
to the full-year impact of the additional debt incurred in
connection with the acquisition of Stationers Distributing
and the debt required to meet working capital and other
capital expenditure needs.
Income before income taxes increased by 82.2% from
Fiscal 1992 to Fiscal 1993. Net income per share was $1.15
for Fiscal 1993, a 62.0% increase from the $0.71 for Fiscal
1992.
Certain interim expenses and inventory estimates are
recognized throughout the fiscal year relating to shrinkage,
inflation and product mix. The results of the year-end
close and physical inventory reflected a favorable
adjustment with respect to such estimates, resulting in
approximately $2.6 million of additional net income, which
is reflected in the fourth quarter of Fiscal 1993.
The effective tax rates for the fiscal years ending
August 31, 1993 and August 31, 1992 were 42.1% and 43.9%,
respectively. The decrease is primarily due to a decline in
the non-deductible losses in the Company's foreign operation
and a decrease in the effective state tax rate, offset by an
increase in the Federal tax rate.
Liquidity and Capital Resources
A change occurred in the Company's liquidity and
capital resources as a result of the March 30, 1995 Merger
between United Stationers Inc. and Associated Holdings,
Inc.; see Note 1 to the Consolidated Financial Statements.
During the first seven months of 1995, funds to support
the Company's working capital and capital expenditure
requirements were generated from borrowings under the
Company's Reducing Revolving Credit and Term Loan Agreement
(the "Credit Agreement") and operating activities.
The decrease in net cash provided by operations in
Fiscal 1994 ($8.1 million) compared with Fiscal 1993 ($36.0
million) was primarily attributable to a decrease in accrued
liabilities, accounts payable and a decrease in net income,
partially offset by a decrease in accounts receivable and
inventory.
Net cash used in investing activities in Fiscal 1992
included $37.3 million of cash as part of the purchase price
of Stationers Distributing Company, Inc. (see Note 3 to the
Consolidated Financial Statements). Net capital
expenditures in Fiscal 1994, 1993 and 1992 were $10.5
million, $30.0 million and $8.2 million, respectively.
Net cash provided by financing activities in Fiscal
1992 primarily reflects additional debt to finance the
acquisition of Stationers Distributing Company, Inc.
On March 30, 1995, the Company had $149.0 million of
borrowings outstanding under the Credit Agreement. The
Credit Agreement, as amended, consisted of $130.0 million
revolving credit facility ("Revolver") and a $30.0 million
term loan ("Term Loan").
The Revolver provided for revolving credit loans up to
the amount of the commitment until August 31, 1997, at the
Company's option. The initial $130.0 million commitment
decreases quarterly to $83.6 million as of August 31, 1997
based on quarterly decreases which began in May 1994 as
specified in the Credit Agreement. Under the terms of the
Credit Agreement, the Company was required to pay a facility
fee of 3/16 of 1% of the total available Revolver. The Term
Loan matures on September 30, 1995 (or earlier upon certain
subsequent offerings by the Company of debt or equity).
Interest on both loans is payable at varying rates provided
for in the Credit Agreement.
The Credit Agreement contained certain financial
covenants covering the Company and its subsidiaries on a
consolidated basis, including, without limitation, covenants
relating to the consolidated current ratio, tangible net
worth, capitalization, fixed charge coverage, capital
expenditures and payment of dividends by the Company.
On February 28, 1995 the Company entered into a loan
agreement which provided for an additional line of credit of
$30.0 million. Under the terms of the loan agreement, the
Company was required to pay a facility fee of 3/16 of 1% of
the total face amount of the line of credit. The
termination date for the line of credit is April 30, 1995.
Interest is payable at varying rates provided for in the
Agreement. As of March 30, 1995, the Company had a $6.0
million outstanding balance under this Agreement.
During the transition period of 1995, capital expenditures
totaled approximately $7.8 million.
Report of Independent Auditors
To the Stockholders and Board of
Directors of United Stationers Inc. :
We have audited the accompanying consolidated balance
sheet of United Stationers Inc. and Subsidiary as of March
30, 1995 and the related consolidated statements of
operations, changes in stockholders' investment and cash
flows for the seven months then ended. Our audit also
included the financial statement schedule as of March 30,
1995 and for the seven months then ended listed in the index
at Item 14 (A). These financial statements and schedule are
the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial
statements and schedule based on our audit.
We conducted our audit in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides
a reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
consolidated financial position of United Stationers Inc.
and Subsidiary at March 30, 1995 and the consolidated
results of their operations and their cash flows for the
seven months then ended in conformity with generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
Chicago, Illinois
June 27, 1995
/S/ERNST & YOUNG LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors
of United Stationers Inc.:
We have audited the accompanying consolidated balance
sheets of UNITED STATIONERS INC. (a Delaware Corporation)
AND SUBSIDIARIES as of August 31, 1994 and 1993, and the
related consolidated statements of operations, changes in
stockholders' investment and cash flows for fiscal years
ended August 31, 1994, 1993 and 1992. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that
we plan and perform the audit to obtain reasonable assurance
about whether the consolidated financial statements are free
of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures
in the consolidated financial statements. An audit also
includes assessing the accounting principles used and
significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements
referred to above present fairly, in all material respects,
the financial position of United Stationers Inc. and
Subsidiaries as of August 31, 1994 and 1993, and the results
of its operations and its cash flows for the fiscal years
ended August 31, 1994, 1993 and 1992, in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an
opinion on the basic financial statements taken as a whole.
Schedule II is the responsibility of the Company's
management and is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not
part of the basic financial statements. This schedule has
been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data
required to be set forth therein in relation to the basic
financial statements taken as a whole.
Chicago, Illinois,
October 6, 1994.
/S/Arthur Andersen LLP
Consolidated Statements of Operations (in thousands of dollars, except share
data)
United Stationers Inc. and Subsidiary
Seven Months Ended Fiscal
Year Ended
(Audited)(Unaudited)(Audited)(Audited)(Audited)
For the Period EndedMarch 30,March 31, Aug. 31, Aug. 31,Aug. 31,
1995 1994 1994 1993 1992
Net Sales $980,575$871,585$1,473,024$1,470,115$1,094,275
Cost of Sales 773,857 675,7201,150,1231,125,596848,588
Gross profit on sales$206,718$195,865$322,901$344,519$245,687
Operating Expenses
Warehousing, marketing and
administrative expenses$174,021$170,420$ 286,607$298,405 $213,372
Merger-related costs27,780 - - - - - - - -
Restructuring charge - - - - - - - - 5,913
Total operating expenses$201,801$170,420$ 286,607$298,405 $219,285
Income from operations$ 4,917$ 25,445$ 36,294 $46,114 $ 26,402
Other Income (Expense)
Interest expense$ (7,640)$(6,095)$ (10,722)$(9,849)$ (6,980)
Interest income 140 258 261 299 477
Other, net 41 117 225 355 364
Total other expense$ (7,459)$(5,720)$ (10,236)$(9,195)$ (6,139)
Income (loss) before income taxes $ (2,542)$19,725$ 26,058 $36,919 $
20,263
Income Taxes 4,692 8,185 10,309 15,559 8,899
Net Income (Loss)$ (7,234)$11,540$ 15,749$21,360$ 11,364
Weighted Average Number of
Common Shares Outstanding18,593,61418,585,45118,587,28218,559,600 16,088,450
Net Income (Loss) per Common Share$(0.39) $0.62 $0.85 $1.15 $0.71
The accompanying notes to consolidated financial statements are an integral part
of these statements.
Consolidated Balance Sheets (in thousands of dollars)
United Stationers Inc. and Subsidiary
March 30, Aug. 31,Aug. 31,
Assets 1995 1994 1993
Current Assets
Cash and cash equivalents $ 14,515$ 6,920$ 7,889
Accounts receivable, less reserves for
doubtful accounts of $4,775 in 1995,
$4,010 in 1994 and $3,964 in 1993 188,672 187,565 188,396
Inventories 306,741 225,794 229,760
Deferred income taxes and prepaid expenses22,98715,51216,426
Total current assets $532,915 $435,791$442,471
Property, Plant and Equipment, at cost
Land and buildings $ 92,907 $ 92,099$ 90,147
Fixtures and equipment 152,059 151,793 144,625
Leasehold improvements 85 36 46
Total property, plant and equipment$245,051 $243,928$234,818
Less - Accumulated depreciation
and amortization 118,219 114,364 97,182
Net property, plant and equipment $126,832 $129,564$137,636
Goodwill, net $ 41,719 $ 42,369$ 43,484
Other Assets $ 10,373 $ 10,826$ 11,195
Total assets $711,839 $618,550$634,786
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Consolidated Balance Sheets (in thousands of dollars, except share data)
United Stationers Inc. and Subsidiary
March 30, Aug. 31,Aug. 31,
Liabilities and Stockholders' Investment1995 1994 1993
Current Liabilities
Short-term debt and current maturities
of long-term obligations $ 43,501$ 6,338$ 3,448
Accounts payable 146,222 121,793 150,374
Accrued expenses 77,219 65,055 69,175
Accrued income taxes 8,373 2,778 3,400
Total current liabilities $275,315 $195,964$226,397
Deferred Income Taxes $ 13,494 $ 17,427$ 14,484
Long-Term Obligations
Long-term debt $173,933 $149,465 146,735
Other liabilities 15,972 9,684 9,473
Total long-term obligations $189,905 $159,149$156,208
Stockholders' Investment
Preferred stock, no par value, authorized
1,500,000 shares, no shares issued
or outstanding $ --$ -- $
- --
Common stock, $.10 par value, authorized
40,000,000 shares, issued 18,610,929
shares in 1995, 18,592,054 shares in
1994 and 18,586,627 shares in 1993 1,861 1,859 1,859
Capital in excess of par value 91,912 91,729 91,687
Retained earnings 139,495 152,448 144,292
Less -- 14,347 shares, 1,828 shares and 9,993
shares of common stock in treasury at cost
in 1995, 1994 and 1993, respectively(143) (26) (141)
Total stockholders' investment $233,125 $246,010$237,697
Total liabilities and stockholders' investment$711,839$618,550 $634,786
The accompanying notes to consolidated financial statements are an integral
part of these statements.
Consolidated Statements of Changes in Stockholders' Investment (in thousands of
dollars, except share data)
United Stationers Inc. and Subsidiary
Number of Capital in Total
Common CommonExcess ofRetainedTreasuryStockholders'
Shares StockPar ValueEarnings StockInvestment
Balance, August 31, 199115,535,013$1,554$54,557$125,704$(231)$181,584
Net Income - - - - -- 11,364 - - 11,364
Issuance of common shares3,016,16930136,643 - - - - 36,944
Cash dividends - $.40 per
share on common stock - - - - - - (6,535) - - (6,535)
Disposition of treasury stock - - - - - - - - 30 30
Balance, August 31, 199218,551,182$1,855$91,200$130,533$(201)$223,387
Net Income - - - - - - 21,360 - - 21,360
Issuance of common shares35,445 4 487 - - - - 491
Cash dividends - $.40 per
share on common stock - - - - - - (7,601) - - (7,601)
Disposition of treasury stock - - - - - - - - 60 60
Balance, August 31, 199318,586,627$1,859$91,687$144,292$(141)$237,697
Net Income - - - - - - 15,749 - - 15,749
Issuance of common shares 5,427 - - 42 - - - - 42
Cash dividends - $.40 per
share on common stock - - - - - - (7,593) - - (7,593)
Disposition of treasury stock - - - - - - - - 115 115
Balance, August 31, 199418,592,054$1,859$91,729$152,448$ (26)$246,010
Net Loss - - - - - - (7,234) - - (7,234)
Issuance of common shares18,875 2 183 - - - - 185
Cash dividends - $.30 per share
on common stock - - - - - - (5,719) - - (5,719)
Acquisition of treasury stock - - - - - - - - (117) (117)
Balance, March 30, 199518,610,929$1,861$91,912$139,495$(143)$233,125
The accompanying notes to consolidated financial statements are an integral part
of these statements.
Consolidated Statements of Cash Flows (in thousands of dollars)
United Stationers Inc. and Subsidiary
(Audited)(Unaudited)(Audited)(Audited)(A
udited)
March 30,March 31,Aug. 31,Aug. 31Aug. 31,
For the Period Ended 1995 1994 1994 1993 1992
Cash Flows from Operating Activities
Net Income (Loss) $ (7,234)$ 11,540$ 15,749$ 21,360$
11,364
Adjustments to reconcile net income to net cash (used in)
provided by operating activities, net of SDC purchase in 1992:
Loss on sale of fixed assets $ 200$ 494$ 579$ 476
$ 55
Depreciation and amortization 12,595 12,103 21,236 21,243 19,879
(Decrease)/increase in deferred taxes (3,933) 1,298 2,943 2,261
(8,240)
Increase/(decrease) in accounts payable 24,429(64,918)(28,581) 15,259
7,195
Increase/(decrease) in accrued liabilities 17,260(14,407) (7,522) 3,655
(2,896)
(Increase)/decrease in accounts receivable (1,107) 8,062 831(20,016)
(12,681)
(Increase)/decrease in inventories (80,947) (7,818) 3,966 (7,353)(15,776)
(Increase)/decrease in prepaid expenses (7,475) (752) 914 1,392
3,940
Increase in Other Assets (1,341) (1,359) (2,007) (2,275) (5,378)
Net Cash (Used in) Provided by Operating Activities $(47,553)$ (55,757)
$ 8,108 $ 36,002$ (2,538)
Acquisition of property, plant and equipment (7,799)$ (4,487)$ (1
0,719) $ (30,008)$ (8,342)
Proceeds from disposition of property, plant & equipment 35 200
220 50 51
Payment for Purchase of SDC, Net of cash acquired of $2,480 - -
- - - - - - -(37,338)
Net Cash Used in Investing Activities $ (7,764)$ (4,287)$ (10,499)$
(29,958) $ 45,629)
Cash Flows From Financing Activities
(Decrease)/increase in short-term debt $ 5,660$ 33$ (2,855)$
(481) $ 1,636
Payments on long-term obligations (4,541) (1,269) (1,533) (4,537) (4,213)
Additions to long-term obligations 67,444 69,348 13,246 1,971 57,460
Issuance of common shares 185 25 42 491 164
Payment of dividends (5,719) (5,738) (7,593) (7,601) (6,535)
(Acquisition)/disposition of treasury stock (117) 115 115
60 30
Net Cash Provided by (Used in) Financing Activities $62,916$62,514
$ 1,422 $(10,097) $48,542
Net increase/(decrease) in cash and cash equivalents $ 7,595$ 2,470
$ (969) $ (4,053)$ 375
Cash and Cash Equivalents at the beginning of the period 6,920 7,889
7,889 11,942 11,567
Cash and Cash Equivalents at the End of the Period $ 14,515 $10,359$ 6,920
$ 7,889 $11,942
Supplemental Disclosures of Cash Flow Information
Cash paid during the period for:
Interest (net of amount capitalized) $ 6,851$ 5,943$10,199$ 8,972
$ 6,722
Income taxes 9,257 6,054 6,229 18,395 14,489
Supplemental Schedule of Noncash Investing and Financing Activities:
Fair Value of Assets Acquired $ - -$ - -$ - -$ - -
$175,359
Cash Paid - - - - - - - -(39,818)
Common Stock Issued - - - - - - - - (36,780)
Liabilities Assumed/Incurred - - - - - - - -$ 98,761
Investment in Business Venture $ - -$ - -$ - -$ 742
$ - -
The accompanying notes to consolidated financial statements are an integral part
of these statements.
United Stationers Inc. and Subsidiary
Notes to Consolidated Financial Statements
1. Subsequent Event
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." 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.
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.
On May 3, 1995, USSC completed the issuance of $150 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).
The New Credit Facilities contain certain financial covenants covering
the Company and its subsidiaries on a consolidated basis, including,
without limitation, covenants relating to tangible net worth,
capitalization, fixed charge coverage, capital expenditures and payment of
dividends by the Company.
Effective for 1995, the Company changed its fiscal year from a year end
of August 31 to December 31. The financial statements included herein
represent the final financial statements of the Company through the date of
the consummation of the Merger. Future financial statements of the Company
will reflect Associated and its acquisition of the Company, and will be on
the basis of a December 31 fiscal year end.
As part of the Merger, the Company incurred approximately $27.8 million
of merger-related costs. The amount consisted of employment contracts
($9.6 million); insurance benefits ($7.4 million); legal, accounting and
other professional services fees ($5.2 million); stock options ($3.0
million); and letter of credit fees and other ($2.6 million).
Notes to Consolidated Financial Statements
United Stationers Inc. and Subsidiary
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of United
Stationers Inc. and its wholly owned subsidiary ("the Company").
Investments in 20% to 50% owned companies are accounted for by the equity
method. All significant intercompany accounts and transactions have been
eliminated in consolidation. Certain prior-year amounts have been
reclassified to conform with current-year presentations.
Revenue Recognition
Sales and provisions for estimated sales returns and allowances are
recorded at the time of shipment.
Cash and Cash Equivalents
Investments in low-risk instruments that have original maturities of
three months or less are considered to be cash equivalents. Cash
equivalents are stated at cost which approximates market value. The
Company's cash equivalent policy conforms to the requirements of Financial
Accounting Standard No. 95.
Inventories
Inventories constituting approximately 82% of total inventories at
March 30, 1995, August 31, 1994 and August 31, 1993 have been valued under
the last-in, first-out (LIFO) method with the remainder of the inventory
valued under the first-in, first-out (FIFO) method. Inventory valued under
the FIFO and LIFO accounting methods are recorded at the lower of cost or
market. If the lower of FIFO cost or market method of inventory accounting
had been used by the Company for all inventories, merchandise inventories
would have been approximately $21,797,000, $18,854,000 and $16,679,000
higher than reported at March 30, 1995, August 31, 1994 and August 31,
1993, respectively.
In 1994, liquidations of certain LIFO inventories had the effect of
increasing net earnings by $830,000 or $0.04 per share.
Depreciation and Amortization
Depreciation and amortization are determined by using the straight-line
method over the estimated useful lives of the assets.
The estimated useful life assigned to fixtures and equipment is from
two to 10 years; the estimated useful life assigned to buildings does not
exceed 40 years; leasehold improvements and assets under capital leases are
amortized over the lesser of their useful lives or the term of the
applicable lease.
Goodwill reflecting the excess of cost over the value of net assets of
businesses acquired is being amortized on a straight-line basis over 40
years. The cumulative amount of goodwill amortized at March 30, 1995,
August 31, 1994 and August 31, 1993 is $2,965,000, $2,315,000 and
$1,200,000, respectively.
Software Capitalization
The Company capitalizes major internal and external systems development
costs determined to have benefits for future periods. Amortization expense
is recognized over the periods in which the benefits are realized,
generally not to exceed three years. Systems development costs capitalized
were $1,896,000, $2,166,000, $1,955,000 and $4,202,000 in 1995, 1994, 1993
and 1992, respectively. Amortization expense was $1,795,000, $2,376,000,
$2,946,000 and $3,384,000 in 1995, 1994, 1993 and 1992, respectively.
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, trade payables and debt instruments. The
book value of cash and cash equivalents, trade receivables and trade
payables are considered to be representative of their respective fair
values.
Borrowings under the Company's Reducing Revolving Credit and Term Loan
Agreement are considered to be at fair market value. The Company had
approximately $62.4 million, $62.7 million and $66.1 million of long-term
debt (excluding borrowings under the Company's Reducing Revolving Credit
and Term Loan Agreement) outstanding as of March 30, 1995, August 31, 1994,
and August 31, 1993, respectively. The approximate fair value was $61.3
million, $59.8 million and $68.0 million as of March 30, 1995, August 31,
1994 and August 31, 1993, respectively. The fair value is based on the
current rates offered to the Company for debt of similar maturities. The
fair values on the long-term debt financial instruments are not necessarily
indicative of the amounts that would be realized in a current market
exchange and exclude any liquidation or origination costs.
Foreign Currency Translation
All assets and liabilities of the Company's foreign operations are
translated at current exchange rates. Revenues and expenses are translated
at average exchange rates for the year in accordance with Statement of
Financial Accounting Standard No. 52. The amounts for all years presented
were immaterial.
Earnings Per Share
Earnings per share and the effect on earnings per share of potentially
dilutive stock options are computed by the treasury stock method. This
computation takes into account the weighted average number of shares
outstanding during each year, outstanding stock options and their exercise
prices, and the market price of the stock throughout the year. The
exercise of outstanding stock options would not result in a material
dilution of earnings per share.
3. Business Combination and Restructuring Charge
On June 24, 1992, the Company acquired all of the outstanding capital
stock of SDC Distributing Corp., parent of Stationers Distributing Company,
Inc. ("SDC"). The results of operations of SDC have been included in the
Company's consolidated financial statements since June 25, 1992.
The following summarized unaudited pro forma results of operations for
the years ended August 31, 1992 and 1991 assume the acquisition occurred at
the beginning of the respective periods. 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.
(in thousands of dollars, except share data) (unaudited):
1992 1991
Net Sales $1,445,900 $1,378,734
Net Income 20,444 14,070
Net Income per Share 1.10 0.76
In the fourth quarter of 1992, the Company recorded a $5.9 million pre-
tax restructuring charge related to severance payments and closing of
certain facilities associated with the acquisition.
4. Long-Term Debt
Long-term debt consists of the following amounts (in thousands of dollars):
1995 1994 1993
Mortgages, 9.0% to 12.5%, due in installments until 2002, secured by the
Regional
Distribution Centers in Livonia, Michigan; Pennsauken, New Jersey; Dallas,
Texas; Woburn, Massachusetts; and The City of Industry, California$ 12,908
$ 13,182 $ 13,615
Industrial development bonds, interest at 69% of prime, maturing in 2015,
secured
by land, buildings and certain equipment located in Edison, New Jersey8,000
8,000 8,000
Industrial development bonds, at market interest rates, maturing at various
dates
through 2011 14,300 14,300 14,300
Industrial development bonds, at 66% to 79% of prime, maturing at various dates
through 2005 15,500 15,500 15,500
Unsecured loan, at 9.65%, maturing at various dates through 199811,45011,450
14,300
Other long-term debt 276 303 356
Term Loan 30,000 30,000 30,000
Revolver 125,000 63,000 54,000
$217,434$155,735$150,071
Less -- current maturities 43,501 6,270 3,336
$173,933$149,465$146,735
The prevailing prime interest rate at March 30, 1995, August 31,
1994 and August 31, 1993 was 9.0%, 7.8%, and 6.0%, respectively.
The Company has a $160.0 million Reducing Revolving Credit and Term
Loan Agreement ("Credit Agreement") with a group of seven lenders (the
"Lenders"). The Credit Agreement consists of a $130.0 million revolving
credit facility ("Revolver") and a $30.0 million term loan ("Term Loan").
Proceeds are used to finance working capital requirements and capital
expenditures of the Company.
The Revolver provides for revolving credit loans up to the amount of
the commitment until August 31, 1997, at the Company's option. The initial
$130.0 million commitment decreases to $83.6 million as of August 31, 1997
based on quarterly decreases which began in May 1994 as specified in the
Credit Agreement. As of August 31, 1994, the Revolver commitment is $126.0
million. Under the terms of the Credit Agreement, the Company is required to
pay a facility fee of 3/16 of 1% of the total available Revolver. The Term
Loan (as amended) matures on September 30, 1995 (or earlier upon certain
subsequent offerings by the Company of debt or equity). The Term Loan can be
prepaid without penalty. Interest on both loans is payable at varying rates
provided for in the Credit Agreement.
On February 28, 1995, the Company entered into a $30.0 million line
of credit with a major bank. This credit facility was entered into to meet
seasonal requirements after the Revolving Credit and Term Loan Agreement was
fully utilized, and bore interest at agreed upon market rates. The Company
had $6.0 million outstanding under this agreement immediately prior to the
Merger. This agreement was terminated in connection with the Merger.
The Credit Agreement contains certain financial covenants covering the
Company and its subsidiaries on a consolidated basis, including, without
limitation, covenants relating to the consolidated current ratio, tangible
net worth, capitalization, fixed charge coverage, capital expenditures and
payment of dividends by the Company.
The net book value of assets subject to secured mortgages and
industrial development bonds as of March 30, 1995, August 31, 1994 and
August 31, 1993 was $28,128,000, $28,610,000 and $28,962,000, respectively.
Maturities of long-term debt (excluding amounts borrowed under the
Credit Agreement), for the following periods as indicated, are as follows
(in thousands of dollars):
Year (except 1995) Amount
Nine Months Ending December 31, 1995 $ 6,125
1996 8,167
1997 8,218
1998 8,824
1999 6,129
Later years 24,971
$62,434
As part of the Merger, approximately $180 million of debt at March
30, 1995 was refinanced. The refinanced debt consisted of various
mortgages, the Edison, New Jersey industrial development bonds, the private
placement loan, the Term Loan, and Revolver.
5. Pension Plans and Postretirement Benefits
The Company has pension plans in effect for substantially all employees.
Non-contributory plans covering non-union employees provide pension benefits
that are based on years of credited service and a percentage of annual
compensation. Non-contributory plans covering union members generally provide
benefits of stated amounts based on years of service. The Company funds the
plans in accordance with current tax laws.
The Company also has a non-contributory, non-qualified plan ("Supplemental
Benefit Plan") in effect for certain executives. The Company has not funded
this plan.
Pension expense in 1995, 1994, 1993 and 1992 was approximately $1,707,000,
$1,755,000, $1,269,000 and $866,000, respectively.
The following table sets forth the plans' funded status at March 30, 1995,
August 31, 1994 and August 31, 1993 (in thousands of dollars):
Supplemental
Pension Plans
Benefit Plan
1995 1994 1993 1995 1 1994 1993
Actuarial Present Value of Benefits Obligation
Vested benefits $16,446 $15,215 $15,063 $ 0 $ 549 $ 442
Non-vested benefits 1,682 1,887 1,702 0 16 4
Accumulated benefits obligation$18,128$17,102 $16,765 $ 0 $ 565 $ 446
Effect of projected future compensation levels 2,511 2,9822,356 0
328 119
Projected benefits obligation $20,639 $20,084 $19,121 $ 0 $ 893 $565
Plan assets at fair value 22,683 21,000 20,875 0 -- - -
Projected benefits obligation less than
(in excess of) plan assets $ 2,044 $ 916$ 1,754 $ 0 $ (893) $(565)
Unrecognized net gain due to past
experience different from assumptions (914) 266(279) 0 189
(9)
Unrecognized prior service cost 1,101 1,347 1,270 0 131 160
Unrecognized net (asset) obligation at
September 1, 1985 to be amortized over
3 to 12 years in 1995 and 1994
4 to 13 years in 1993 (412) (467) (561) 0 90 120
Prepaid (accrued) pension liability recognized
in Consolidated Balance Sheets$ 1,819 $ 2,062$2,184 $ 0 $(483) $(294)
1 The Supplemental Benefit Plan was funded and paid out as a result of the
merger.
The plans' assets consist of debt securities, equity securities and
government securities. Net periodic pension cost for 1995, 1994, 1993 and 1992
for pension and supplemental benefits plans includes the following components
(in thousands of dollars):
1995 1994 1993 1992
Service cost - benefits earned during the period$1,084$1,863 $1,293 $1,055
Interest cost on projected benefits obligation 909 1,436 1,209 952
Actual return on assets (780) 263 (3,235) (983)
Net amortization and deferral 494 (1,807) 2,002 (158)
Net periodic pension cost $1,707 $1,755 $1,269$ 866
The projected benefit obligations for 1995, 1994, 1993 and 1992 were
determined using an assumed discount rate of 7.5%, 7.5%, 7.25%, and 7.5%,
respectively. In 1995, 1994, 1993, and 1992, the assumed rate of compensation
increase ranged from 0% to 5.5%. The expected long-term rate of return on
assets used in determining net periodic pension cost was 7.5%.
The Company provides an unfunded health care plan to substantially all
retired non-union employees and their dependents. Eligibility requirements are
based on the individual's age (minimum age of 55), years of service and hire
date. The benefits are subject to retiree contributions, deductibles, co-
payment provisions and other limitations.
During the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standard No. 106 (SFAS 106), "Employer's Accounting for
Postretirement Benefits Other Than Pensions." SFAS 106 requires companies to
accrue the expected cost of postretirement health care and life insurance
benefits throughout the employee's active service period. Previously,
postretirement health care costs were recognized as claims were paid. The
Company elected to amortize the unfunded Accumulated Postretirement Benefit
Obligation over 20 years.
The assumed health care average cost trend rate used in measuring the APBO
at March 30, 1995 was 11.0% in 1995 and 3% in 1996 and beyond. Beginning in
1996, retirees will pay the difference between actual plan costs and the portion
of cost paid by the Company which is limited to a cost trend rate of 3%. The
assumed discount rate was 7.75%. A 1% increase in the care cost trend rate
would increase the APBO as of March 30, 1995 by approximately $339,000 and the
sum of the 1995 annual service cost and interest cost by approximately $35,000.
The cost of postretirement health care benefits for the seven months ended
March 30, 1995 and the year ended August 31, 1994 are as follows (in thousands
of dollars):
1995 1994
Service cost $ 109 $ 246
Interest on accumulated benefits obligation 106 146
Amortization of transition obligation 58 100
Net postretirement benefit cost $ 273 $ 492
The following table sets forth the amounts recognized in the Company's Balance
Sheet at March 30, 1995 and August 31, 1994 (in thousands of dollars):
March 30, Aug. 31,
1995 1994
Retirees $ (781)$ (601)
Other active plan participants (1,758) (1,634)
Total APBO $ (2,539) $ (2,235)
Unrecognized transition obligation 1,838 1,897
Unrecognized net loss (gain) 63 (76)
Accrued postretirement benefit obligation$ (638)$ (414)
Prior to 1994, the cost of providing postretirement health care benefits,
net of retiree contributions, was $46,777 in 1993 and $33,396 in 1992.
The Company has a qualified Profit Sharing Plan in which all salaried
employees and certain hourly paid employees of the Company are eligible to
participate upon completion of six consecutive months of employment. The Profit
Sharing Plan provides for annual contributions by the Company in an amount
determined by the Board of Directors. The Plan also permits employees to have
contributions made as 401(k) salary deferrals on their behalf and to make after-
tax voluntary contributions. The Plan provides that the Company may match
employee contributions as 401(k) salary deferrals. Company contributions to the
Plan for both profit sharing and matching of employee contributions were
approximately $0.8 million in 1995, $0.5 million in 1994, $1.4 million in 1993
and $1.0 million in 1992.
6. Stock Incentive Plans
As a result of the change in control of the Company, the Company paid
out approximately $3.0 million to option holders representing the
difference between the tender offer price of the stock ($15.50 per share)
and the option exercise price. The amount was included in merger-related
costs in 1995.
Under the Directors' Stock Option Plan, the Company granted options for
7,500 shares at a price of $13.75 per share in 1995, 7,500 shares at a
price of $15.25 per share in 1994 and 7,500 shares at a price of $19.25 per
share in 1993. The Directors' Option Plan provides for the granting of
options covering up to 100,000 shares of the Company's common stock,
subject to anti-dilution adjustments. Options are exercisable at any time
after they are granted, but for not more than ten years after the option's
grant. As of the period ended 1995, 1994, and 1993, 0, 41,000 and 45,500
options, respectively, were outstanding at a price range of $8.75 to $22.13
per share.
During fiscal 1995, options for a total of 100,000 shares at $10.50 were
granted to certain officers. The grant was approved at the 1995 Annual
Meeting held in January.
Under the Company's 1981 Stock Incentive Award Plan, options
outstanding had an exercisable life of either five, six or ten years from
the date of grant. The Company granted certain officers 15,000 and 16,700
shares of restricted stock in 1992 and 1991, respectively. There have been
no restricted stock grants since 1992. The grants of restricted shares
resulted in deferred compensation expense of $699,000 of which $16,000,
$39,000, $132,000 and $185,000 was recognized in 1995, 1994, 1993 and 1992,
respectively. The unrecognized portion of deferred compensation was $0,
$16,000 and $55,000 as of March 30, 1995, August 31, 1994 and August 31,
1993, respectively. Under the terms of the grant, the stock does not vest
to the employee until completion of three years of employment after the
date of grant. The 1981 Stock Incentive Award Plan was terminated by the
Company's Board of Directors on March 30, 1995.
In 1989, the Board of Directors terminated the 1985 Non-qualified Stock
Option Plan so that no further stock options would be issued under this
plan. The termination of the plan did not affect the options previously
granted and outstanding. No option could have been exercised more than ten
years after its grant.
The following table summarizes the transactions of the 1981 and 1985
Option Plans for 1995, 1994 and 1993.
1981 Stock Incentive Award Plan Option Price Option Price Option
Price
(excluding restricted stock) 1995 Range 1994 Range 1993Range
Options outstanding at
beginning of the period1,135,060$8.64-$19.39891,350$8.64-$19.39995,520 $8.64-
$19.39
Granted 100,000 $10.50 401,050$10.00-$16.2518,000$13.75-$14.00
Exercised (22,860)$8.64-$9.29(3,520)$ 8.64-$13.75(37,040)$8.64-$17.48
Cancelled 1 (1,212,200)$8.64-$19.39(153,820)$ 8.64-$19.39 (85,130)$8.64-
$19.39
Options outstanding at end
of the period - - 1,135,060 891,350
1985 Non-qualified Stock Option Price Option Price Option Price
Option Plan 1995 Range 1994 Range 1993 Range
Options outstanding at
beginning of the period 109,500$14.78-$18.09109,500$14.78-$18.09143,000
$14.78-$18.09
Granted - - - - - - - - - - - -
Exercised - - - - - - - - (5,000) $18.09
Cancelled 1 (109,500)$14.78-$18.09 - - - - (28,500)$14.78-
$18.09
Options outstanding at end
of the period - - 109,500 109,500
1 As a result in change in control of the Company, the Company paid out to
option holders the difference between the tender offer price of the stock
($15.50 per share) and the option exercise price. The total amount was
included in merger-related costs in 1995.
7. Leases
The Company has entered into several non-cancelable long-term leases on
property and equipment. Future minimum lease payments for non-cancelable
leases in effect at March 30, 1995 having initial remaining terms of more
than one year are as follows (in thousands of dollars):
Operating Leases
LeaseSublease Net Lease
Year (except 1995) Payments Income Payments
1995 - Nine months ending Dec. 31, 1995$ 9,165$ 617 $ 8,548
1996 9,894 269 9,911
1997 7,712 199 7,513
1998 5,811 146 5,665
1999 4,275 61 4,067
Later years 14,263 - - 14,263
Total minimum lease payments $51,120 $1,292 $49,967
Rental expense for all operating leases was approximately $7,731,000,
$13,549,000, $14,917,000 and $11,546,000 in 1995, 1994, 1993 and 1992,
respectively.
8. Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes," which was
adopted in 1992.
The Company does not intend to provide Federal income taxes on the
undistributed earnings for its foreign subsidiaries. The Company's policy is
to leave the income in the country of origin until such time as all Federal
income tax due upon its distribution will be fully offset by foreign tax
credits. As of March 30, 1995, neither foreign subsidiary had undistributed
earnings.
The Company provides for income taxes at statutory rates based on income
reported for financial statement purposes. A summary of income tax expense is
shown below (in thousands of dollars):
1995 1994 1993 1992
Taxes currently payable
Federal $14,122 $7,059 $7,972 $8,565
Other tax credits - (5) (10) (37)
State 2,584 1,591 2,274 2,501
Prepaid and deferred taxes (12,014) 1,664 5,323 (2,130)
$ 4,692 $10,309 $15,559 $8,899
The deferred tax assets and liabilities result from timing differences in
the recognition of certain income and expense items for financial and tax
accounting purposes. The sources of these differences and the related tax
effects were as follows (in thousands of dollars):
March 30, 1995 August 31, 1994
Aug. 31, 1993
AssetsLiabilitiesAssetsLiabilities AssetsLiabi
lities
Reserves for returns, rebates and allowances$18,869 $ - -$14,593$ - -
$14,250 $ - -
Reserves for direct acquisition costs 1,477 - - 1,700 - - 3,887
- - -
Reserves for restructuring charges10 - - 332 - - 1,720 - -
Merger-related costs 6,737 - - - - - - - -
- - -
Reserves for worker's compensation insurance 3,814 - - 3,905 - -
3,818 - -
Accelerated depreciation - - 17,716 -- 17,360 - - 15,252
Software capitalization - - 1,465 -- 1,595 - - 1,913
Inventory reserves and related
purchase accounting differences- - 6,142 -- 7,143 - - 7,738
All other 4,554 2,629 4,843 2,472 3,613 1,836
Total $35,461 $27,952 $25,373 $28,570$27,288 $26,739
In the consolidated balance sheets, these deferred assets and deferred
liabilities are classified as deferred tax assets or deferred income tax
liabilities, based on the classification of the related asset or liability for
financial reporting. A deferred tax liability or asset that is not related to
an asset or liability for financial reporting, including deferred tax assets
related to carryforwards, are classified according to the expected reversal date
of the temporary difference.
No valuation allowance was recorded in 1995 or 1994. A valuation allowance
of $1,504,000 was recorded in 1993.
The Company's effective income tax rates for the period ended March 30,
1995 and August 31, 1994, 1993 and 1992 varied from the statutory federal income
tax rate as set forth in the following table:
1995 1994 1993 1992
Statutory Federal income tax 35.0% 35.0% 34.7%34.0%
State income taxes, net of the Federal
income tax benefit (4.9) 4.8 6.1 6.6
Losses from foreign subsidiaries - - 1.9 1.3 3.3
Liquidation of a foreign subsidiary- - (3.9) - - - -
Non-deductible goodwill amortization(9.0) 1.5 .9 - -
Write-off of deferred income tax assets and other(205.7) .3 (.9) - -
Effective income tax rate (184.6)% 39.6% 42.1%43.9%
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
A report on Form 8-K was filed on April 26, 1995 reporting that the
Company's Board of Directors appointed Ernst & Young LLP as independent
accountants to replace Arthur Andersen LLP.
The Registrant had no disagreements on accounting and financial
disclosure of the type referred to in Item 304 of
Regulation S-K.
Item 10. Directors
In connection with the consummation of the Acquisition, seven of the
nine directors of the Company and all but one of the five directors of the
Company serving prior thereto were replaced by nominees designated by
Associated. The directors of the Company designated by Associated comprise
the persons who were the directors of Associated prior to the Acquisition.
In addition, certain persons serving as executive officers of the Company
or Associated prior to the Merger will no longer be serving in such
capacity.
Set forth below is certain information with respect to those
individuals who are serving as members of the Board of Directors of the
Company on June 23, 1995.
Name Age Position in the Company
Thomas W. Sturgess 44 Chairman of the Board, President and Chief
Executive Officer
of the Company and a Director
Michael D. Rowsey 42 Executive Vice President of the Company and
a Director
Gary G. Miller 45 Vice President and Secretary of the Company
and a Director
James T. Callier, Jr. 60 Director
Daniel J. Good 54 Director
Frederick B. Hegi, Jr. 51 Director
Jeffrey K. Hewson 51 Director
James A. Johnson 41 Director
Joel D. Spungin 56 Director
Set forth below is a description of the backgrounds of the directors
and executive officers of the Company. There is no family relationship
between any directors or executive officers of the Company.
Thomas W. Sturgess became President and Chief Executive Officer of the
Company on May 31, 1995 and Chairman of the Board of Directors of the
Company upon consummation of the Offer. Prior to the Merger, Mr. Sturgess
served as Chairman of the Board and Chief Executive Officer of Associated
since January 1992 and had been Chairman of the Board and Chief Executive
Officer of ASI since December 1994. Mr. Sturgess has served since 1987 as
a general partner of various entities affiliated with Wingate Partners
("Wingate entities"), including the indirect general partner of each of
Wingate Partners and Wingate II. Mr. Sturgess currently serves as Chairman
of the Board of Redman Industries, Inc., a manufactured housing producer
("Redman"), as well as RBPI Holding Corporation, a manufacturer and
distributor of aluminum and vinyl windows ("RBPI"). He is a director of
Loomis Armored Inc., a provider of armored car and related services
("Loomis"), AmeriStat Mobile Medical Services, Inc., a provider of
ambulance services ("AmeriStat"), and Century Products Company, a
manufacturer and distributor of baby seats and other juvenile products
("Century Products").
Michael D. Rowsey was elected to the Board of Directors of the Company
upon consummation of the Offer and became Executive Vice President of the
Company upon consummation of the Merger. Prior to the Merger, Mr. Rowsey
had been a director of Associated since 1992 and President and Chief
Operating Officer of Associated since January 1992. From 1979 to January
1992, Mr. Rowsey served in various capacities with Boise Cascade Office
Products Division, most recently as the North Regional Manager.
Gary G. Miller was elected to the Board of Directors of the Company
upon consummation of the Offer and became Vice President and Secretary of
the Company upon consummation of the Merger. Prior thereto, Mr. Miller had
been a director of Associated since 1992 and Vice President and Secretary
of Associated since January 1992. Mr. Miller also currently serves as
President of Cumberland Capital Corporation ("Cumberland"), a private
investment firm which is located in Fort Worth, Texas and is a stockholder
of the Company. In addition, from 1977 to December 1993, Mr. Miller served
as Executive Vice President, Chief Financial Officer and a director of AFG
Industries, Inc., and its parent company, Clarity Holdings Corp. He is
Chairman of the Board of CFData Corp., a nationwide provider of check
collection and check verification services and is Vice President, Finance
and Administration of Fore Star Golf, Inc., which was formed in 1993 to own
and operate golf facilities.
James T. Callier, Jr. was elected to the Board of Directors of the
Company upon consummation of the Offer. Prior to the Merger, he had been a
director of Associated since 1992. Mr. Callier is an indirect general
partner of Wingate Partners, and has served as President of Callier
Consulting, Inc., an investment management firm, since 1985. Mr. Callier
currently serves as Chairman of the Board of Century Products, as a
director of Redman, RBPI and Loomis and as an advisory director of Wingate
II.
Daniel J. Good was elected to the Board of Directors of the Company
upon consummation of the Offer. Prior to the Merger, he had been a
director of Associated since 1992. Mr. Good is Chairman of Good Capital
Co., Inc. ("Good Capital"), a private investment firm and investment
advisory firm founded in 1989 and located in Lake Forest, Illinois, which
is a stockholder of the Company. Mr. Good is also Vice Chairman of Golden
Cat Corporation, a producer and distributor of cat care products and a
producer of industrial absorbent materials. Mr. Good serves on the Board
of Directors of Supercuts, Inc. Prior to founding Good Capital, Mr. Good
was managing director of the Merchant Banking Group of Shearson Lehman
Hutton, Inc.
Frederick B. Hegi, Jr. was elected to the Board of Directors of the
Company upon consummation of the Offer. Prior to the Merger, he had been a
director of Associated since 1992. Mr. Hegi is a general partner of
various Wingate entities, including the indirect general partner of each of
Wingate Partners and Wingate II. Since May 1982, Mr. Hegi has served as
President of Valley View Capital Corporation, a private investment firm.
Mr. Hegi also currently serves as Chairman of the Board of Loomis Holdings
Corporation, the parent corporation of Loomis, Tahoka First Bancorp, Inc.,
a bank holding company, and Cedar Creek Bancshares, Inc., a bank holding
company, and as a director of RBPI, Century Products, Lone Star
Technologies, Inc., a diversified company engaged in the manufacturing of
steel pipe and in commercial banking services, Cattle Resources, Inc., a
manufacturer of animal feeds and operator of commercial cattle feedlots and
various funds managed by InterWest Partners.
Jeffrey K. Hewson served as President and Chief Executive Officer of
the Company from consummation of the
Merger until May 31, 1995. Prior thereto, he was President and Chief
Operating Officer of the Company since April 1991. He had been Executive
Vice President of the Company since March 1990. Prior to that, he had been
President of ACCO International's U.S. Division since 1989 and President of
its Canadian Division since 1987. ACCO International is a manufacturer of
traditional office products and a subsidiary of American Brands, Inc.,
which is a global consumer products holding company.
James A. Johnson was elected to the Board of Directors of the Company
upon consummation of the Merger. Prior to the Merger, he had been a
director of Associated since 1992. Mr. Johnson is a general partner of
various Wingate entities, including the indirect general partner of each of
Wingate Partners and Wingate II. From 1980 until he joined Wingate
Partners in 1990, Mr. Johnson served as Principal of Booz-Allen & Hamilton,
an international management consulting firm. Mr. Johnson currently serves
as a director of Century Products and AmeriStat.
Joel D. Spungin has served as a member of the Board of Directors of
the Company since 1972 and prior to the consummation of the Offer was a
member of the Board of Directors of the Company, and Chairman of the Board
of Directors of the Company and prior to the Merger was Chief Executive
Officer of the Company since August 1988. From October 1989 until April
1991, he was also President of the Company. Prior to that, since March
1987, Mr. Spungin was Vice Chairman of the Board and Chief Executive
Officer of the Company. Previously, since August 1981, Mr. Spungin served
as President and Chief Operating Officer of the Company. He also serves as
a director of AAR Corp.
Item 11. Executive Compensation
The table and notes below show the compensation paid or accrued to the Chief
Executive Officer and the four other highest-paid officers of
the Company who served as such executive officers during the Fiscal 1995
transition period of September 1, 1994 through March 30, 1995.
Annual Compensation
Long Term Compensation
Fiscal year AwardsLong-Term
ended 8/31 OtherRestricted Incentive
unless annual stock PlanAll Other
Name and principalotherwiseSalary(1)BonuscompensationAward(s)Optionspayouts
Compensation
Position noted ($) ($) ($) ($) (3) (#)($) (4)
($) (5)
Joel D. Spungin1995* 254,833351,313 (2) - - - - 87,6126,914,171
Chairman and Chief 1994431,667 - - (2) - - 45,000 41,19811,416
Executive Officer1993420,500201,344 (2) - - - - 37,683 13,243
Jeffrey K. Hewson1995* 185,333216,720 (2) - - 1,500- 48,7832,501,070
President and Chief 1994309,167 - - (2) - - 38,000 23,169 5,076
Operating Officer1993286,250119,074 (2) - - - - 14,283 6,382
Allen B. Kravis1995* 96,93876,782 (2) - - 5,000 23,5461,103,992
Sr. V.P., Chief1994188,469 - - (2) - -21,000 11,451 4,559
Financial Officer1993175,25065,260 (2) - - - - 9,834 6,494
Steven R. Schwarz1995* 107,91789,032 (2) - - 5,000 18,912734,179
Sr. Vice President 1994181,890 15,818 (2) - - 21,000 9,677 822
1993 169,875 57,279 (2) - - - - 8,226 2,861
Robert H. Cornell1995* 95,08362,042 (2) - - 4,000 13,117577,876
V.P., Human Resources 1994161,625 11,614 (2) - - 11,000 6,817 3,211
1993 156,000 42,532 (2) - - - - 7,945 4,537
* Transition period of September 1, 1994 through March 30, 1995
(1)Includes compensation amounts earned during the fiscal year but deferred
pursuant to Section 401(k) of the Internal Revenue Code under the Company's
Profit Sharing PluSavings Plan.
(2)No amounts of "Other annual compensation" were paid to any named executive
officer, except for perquisites and other personal benefits which for each
executive officer did not exceed the lesser of $50,000 or 10% of such
individual's salary plus bonus.
(3)Restricted stock awards are valued at the market price on date of grant.
Grants are made under the 1981 Stock Incentive Award Plan, and include
tax withholding rights which permit the officer to elect to have shares
withheld to satisfy federal, state and local tax withholding
requirements when the shares become restricted, generally three years
after the grant date. Dividends are paid on restricted shares at the
same rate paid to all shareholders. On August 31, 1994, Mr. Schwarz
held 2,500 shares of restricted stock valued at year-end market value
for Common Stock of $9.50 per share, or a total value of $23,750.
(4)Includes payments from Executive Bonus Plan of awards earned in prior
years payable in three annual installments as shown below. Awards are
partly (30%) in cash and partly (70%) in Share Units which are converted
to and paid out in common stock. Cash payments include earnings on the
cash amounts based on the Company's ROE or the treasury bill rate.
Stock payments are valued at the stock price as of the date of the award
of Share Units:
Spungin Hewson Kravis Schwarz Cornell
1995
Cash $ 87,612$ 48,783$ 23,546$ 18,912$ 13,117
Stock$ -$ -$ -$ -$ - -
1994
Cash $ 15,789$ 8,885$ 4,402$ 3,730$ 2,625
Stock $ 25,409$ 14,284$ 7,049$ 5,947$ 4,192
1993
Cash $ 13,224$ 4,478$ 3,328$ 2,687$ 2,791
Stock $ 24,460$ 9,805$ 6,506$ 5,539$ 5,154
(5) Includes (a) amounts accrued for employment contracts and benefits
(Mr. Spungin $6,640,000; Mr. Hewson $2,123,000; Mr. Kravis $893,000; Mr.
Schwarz $576,000; and Mr. Cornell $512,000), (b) Company contributions to
the Company's Profit Sharing PluSavings Plan (Mr. Spungin $1,504, Mr.
Hewson $1,504, Mr. Kravis $1,504; Mr. Schwarz $1,504, and Mr. Cornell
$1,504; and (c) premiums paid during 1995 for Split Dollar Life, Group Life
and Accidental Death insurance policies (Mr. Spungin $6,888, Mr. Hewson
$2,966, Mr. Kravis $2,797; Mr. Schwarz $551, and Mr. Cornell $2,387); and
(d) payouts of stock options (Mr. Spungin $265,779; Mr. Hewson $373,600;
Mr. Kravis $206,691; Mr. Schwarz $156,124; and Mr. Cornell $61,985).
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth the beneficial ownership of Common
Stock by each of the directors, each of the executive officers named in the
Summary Compensation Table and all of the Company's directors and executive
officers as a group as of February 13, 1995.
Percent of
Common Stock Exercisable
Common Stock
Name Beneficially Owned Options Outstanding
Douglas K. Chapman 87,200(2) (3) 1,500(1)
*
E. David Coolidge III 72,200(3) 1,500(1) *
Ira A. Eichner 10,175(4) 1,500(1) *
David R. Smith 230,191(3) 1,500(1) 1.24%
Jack Twyman 53,200(3) 1,500(1) *
Jerold A. Hecktman 907,180(5) 5,000(1) 4.88%
Joel D. Spungin 101,468(7) - - *
Melvin L. Hecktman 1,074,172(8) 1,500(1) 5.78%
Jeffrey K. Hewson 32,755 *
Steven R. Schwarz 9,922(6) 5,000(1) *
All current directors and executive officers as a group2,413,863(9)
19,000(1) 12.98%
* Less than 1%
(1) Shares are exercisable at any time after grant for a maximum period of
10 years.
(2) Includes 7,000 shares owned by Mr. Chapman's wife, as to which
beneficial ownership by Mr. Chapman is disclaimed.
(3) Includes 52,200 shares held of record by PNC Bank, N.A., as trustee
of the United Stationers Inc. Profit Sharing Trust, as to which Douglas
K. Chapman, E. David Coolidge III, David R. Smith and Jack Twyman share
voting power as members of the Investment Committee of such Trust.
Messrs. Chapman, Coolidge, Smith and Twyman disclaim beneficial
ownership of all such shares.
(4) Includes 1,000 shares owned by Mr. Eichner's wife, as to which
beneficial ownership by Mr. Eichner is disclaimed.
(5) Includes 4,385 shares owned of record and beneficially by Jerold A.
Hecktman and the 902,795 shares owned by Jerold A. Hecktman Family
Investment Partnership, an Illinois limited partnership in which Jerold
A. Hecktman is the sole general partner ("JAHFIP"). Mr. Hecktman is
also a beneficiary of proceeds of the Jerold and Ruth Hecktman
Charitable Remainder Trust u/a/d February 1, 1995 which owns 200,000
shares but disclaims beneficial ownership of such 200,000 shares.
(6) Includes 2,500 restricted shares owned of record by Steven R.
Schwarz, which were granted under the Company's 1981 Stock Incentive
Award Plan. Such shares are subject to restrictions against sale or
transfer for a stated period and are subject to forfeiture if the
grantee is not continuously employed for the period of the restriction.
Such restrictions, however, shall lapse upon a change of control of the
Company.
(7) Mr. Spungin also holds beneficially 56,682 shares pursuant to his
interest in the Joel D. Spungin Family Trust u/a/d November 15, 1990 and
is a beneficiary of the Joel and Marilyn Spungin Charitable Remainder
Trust u/a/d February 1, 1995 which owns 33,333 shares. Mr. Spungin
disclaims beneficial ownership of the shares held by both of the trusts.
(8) Includes 6,667 shares owned of record and beneficially by Melvin L.
Hecktman and the 203,835 in shares owned by Melvin L. Hecktman Family
Investment Partnership, an Illinois limited partnership in which Melvin
L. Hecktman is the sole general partner and is a general partner in MLH
Investment Partnership, a general partnership which owns 863,670 Shares.
Mr. Hecktman is a beneficiary of the Melvin and Judith Hecktman
Charitable Remainder Fund u/a/d February 1, 1995 which owns 80,000
shares but disclaims beneficial ownership of such Shares.
(9) Of the 2,413,863 shares shown as owned by all current directors and
officers as a group, 2,293,316 shares are held with sole voting and
investment power and 120,547 shares are held with shared voting and
investment power, including 52,200 shares held of record by PNC Bank,
N.A., as trustee of the United Stationers Inc. Profit Sharing Trust, as
to which Douglas K. Chapman, E. David Coolidge III, David R. Smith and
Jack Twyman share voting power as members of the Investment Committee of
such Trust, and as to which beneficial ownership by Messrs. Chapman,
Coolidge, Smith and Twyman is disclaimed. The number of shares shown as
owned by all directors and officers as a group also includes 2,500
shares of restricted stock (referred to in Note (6) above) granted under
the Company's 1981 Stock Incentive Award Plan which are subject to
restrictions against sale or other transfer for the specified period of
the restrictions.
Item 13. Certain Relationships and Related Transactions
Security Ownership of Certain Beneficial Owners
The following table sets forth certain information concerning the
Common Stock ownership as of February 13, 1995 (except as noted below) of
each person who is known to the Company to be the beneficial owner of more
than five percent of the Company's Common Stock:
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial OwnerOwnership Class
Jerold A. Hecktman Family Investment Partnership 902,795(1) 4.9%
2200 East Golf Road
Des Plaines, IL 60016
Melvin L. Hecktman 1,074,172(2) 5.8%
c/o Hecktman Management Services
Suite 350
510 Lake Cook Road
Deerfield, IL 60015
Wolf Family Investment Partnership 921,057(3) 5.0%
c/o Johnson, Goldberg & Brown, Ltd.
6703 North Cicero Avenue
Lincolnwood, IL 60646
Attn: Scott Brown
Ariel Capital Management, Inc. 3,449,020(4) 18.6%
307 North Michigan Avenue
Chicago, IL 60601
(1) The Jerold A. Hecktman Family Investment Partnership is an Illinois
limited partnership ("JAHFIP"). Sole voting and investment power over
the shares is exercised by Jerold A. Hecktman, JAHFIP's sole general
partner. Excludes 200,000 Shares held by a charitable remainder trust
of which Jerold A. Hectkman is a beneficiary of proceeds, but over which
he has no voting or dispositive control.
(2) Melvin L. Hecktman owns 6,667 shares as to which he has sole voting
and investment power. Melvin L. Hecktman is the beneficial owner of
1,067,505 Shares by virtue of being a general partner in both the Melvin
L. Hecktman Family Investment Partnership, an Illinois limited
partnership, which owns of record 203,835 Shares and the MLH Investment
Partnership, an Illinois general partnership, which owns of record
863,670 shares. Melvin L. Hecktman is also a beneficiary of the Melvin
and Judith Hecktman Charitable Remainder Trust u/a/d February 1, 1995
which owns 80,000 shares and as to such shares Melvin L. Hecktman
disclaims beneficial interest.
(3) The Wolf Family Investment Partnership is an Illinois limited
partnership ("WFIP"). Sole voting and investment power over the shares
may be exercised only by Barbara Wolf Savage, WFIP's sole general
partner.
(4) As to all of such shares, Ariel Capital Management, Inc. ("Ariel")
serves as investment advisor with shared, sole or no investment or
voting power as directed by each client owning said shares. Ariel
disclaims beneficial ownership of any of the 3,449,020 shares referred
to in this Note (4). Information with respect to Ariel is based on
Ariel's Schedule 13G dated December 31, 1994.
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-
K
(A) The following financial statements, schedules and exhibits are filed as
part of this report:
(1) Financial Statements
Page Number
Consolidated Statements of Operations for the periods ended March 30,
1995,
March 31, 1994, August 31, 1994, August 31, 1993 and August 31, 1992
16
Consolidated Balance Sheets as of March 30, 1995, August 31, 1994
and August 31, 1993 17-18
Consolidated Statements of Changes in Stockholders' Investment for the
periods
ended March 30, 1995, August 31, 1994, August 31, 1993 and August 31,
1992 19
Consolidated Statements of Cash Flows for the periods ended March 30,
1995,
March 31, 1994, August 31, 1994, August 31, 1993 and August 31, 1992
20
Notes to Consolidated Financial Statements 21-35
Reports of Independent Public Accountants 14-15
Page Number
(2) Financial Statement Schedules
II. Valuation and Qualifying Accounts 50
All other
financial statements and schedules not listed have been omitted
because
they are not applicable, not required or because the required
information is included in the consolidated financial statements or notes
thereto.
(3)Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
Sequential
Exhibit
Number Description Page
Number
3.1 *Certificate of
Incorporation of the Registrant (1)
3.2 *By-Laws of the Registrant (1)
4.1 *Indenture, dated as of May 3, 1995, among
United, as Issuer, Registrant, as Guarantor, and
The Bank of New York, as Trustee (2)
4.2*Form of Old Note (included in Exhibit 4.1,
Exhibit A (2)
4.3 *Form of New Note (2)
9.1 *Voting Trust Agreement, dated as of
January 31, 1992, among United, the stockholders
party thereto and Messrs. Sturgess, Hegi,
Miller, Good and Johnson, as voting trustees
(1).
9.2 *First Amendment to Voting Trust Agreement,
dated as of March 30, 1995, among United, the
stockholders party thereto and Messrs. Sturgess,
Hegi, Miller, Good and Johnson, as voting
trustees (1).
9.3 *Letter agreement, dated March 30, 1995,
between United (as successor-in-interest to
Associated) and Boise Cascade regarding the
Voting Trust Agreement (1).
10.1 *Credit Agreement, dated as of March 30,
1995, among the Registrant, United, certain
Lenders named therein and Chase Bank, as Agent
and Lender (2).
10.2 *Waiver and Amendment No. 1, dated as of
April 13, 1995, among the Registrant, United,
each of the lenders party thereto and Chase Bank
(1).
10.3 *Assumption Agreement, dated as of March
30, 1995, among the Registrant, United and Chase
Bank, as agent (1).
10.4 *Revolving Credit Notes, dated March 30,
1994, issued under the Credit
Agreement (1).
10.5 *Tranche A Term Loan Notes, dated March 30,
1995, issued under the Credit Agreement (1).
10.6 *Tranche B Term Loan Notes, dated March 30,
1995, issued under the Credit Agreement (1).
10.7 *Security Agreement, dated as of March 30,
1995, between the Company and Chase Bank, as
agent (1).
10.8 *Form of Indenture of Mortgage, Assignment
of Rents, Security Agreement and Fixture Filing,
dated as of March 30, 1995, by the Registrant in
favor of Chase
Bank (1).
10.9 *Registration Rights Agreement, dated as of
April 26, 1995, among the Registrant, United and
the Initial Purchaser (1).
10.10 *Purchase Agreement, dated April 26,
1995, among the Registrant, United and the
Initial Purchaser (2).
10.11 *Registration Rights Agreement, dated
as of January 31, 1992, between United (as
successor-in-interest to Associated) and CMIHI
(1).
10.12 *Amendment No. 1 to Registration
Rights Agreement, dated as of March 30, 1995,
among United (as successor-in-interest to
Associated), CMIHI and certain other holders of
Lender Warrants (1).
10.13 *Amended and Restated Registration
Rights Agreement, dated as of March 30, 1995,
among United (as successor-in-interest to
Associated), Wingate Partners, Cumberland
Capital Corporation, Good Capital Co., Inc.,
Boise Cascade and certain other United
stockholders (1).
10.14 *Warrant Agreement, dated as of
January 31, 1992, among United (as successor-in-
interest to Associated), the Company (as
successor-in-interest to ASI) and CMIHI (1).
10.15 *Amendment No. 1 to Warrant Agreement,
dated as of October 27, 1992, among United (as
successor-in-interest to Associated), the
Company (as successor-in-interest to ASI), CMIHI
and the other parties thereto (1).
10.16 *Amendment No. 2 to Warrant Agreement,
dated as of March 30, 1995, among United (as
successor-in-interest to Associated), the
Company (as successor-in-interest to ASI), CMIHI
and the other parties thereto (1).
10.17 *Warrant Agreement, dated as of
January 31, 1992, between United (as successor-
in-interest to Associated) and Boise Cascade
(1).
10.18 *Amendment No. 1 to Warrant Agreement,
dated as of March 30, 1995, between United (as
successor-in-interest to Associated) and Boise
Cascade (1).
10.19 *Investment Banking Fee and Management
Agreements, dated as of January 31, 1992, among
United, the Company and each of Wingate
Partners, Cumberland Capital Corporation and
Good Capital Co., Inc. (1).
10.20 *Amendment No. 1 to Investment Banking
Fee and Management Agreements, dated as of March
30, 1995, among the Company, United and each of
Wingate Partners, Cumberland Capital Corporation
and Good Capital Co., Inc. (1).
10.21 *Employment Agreements, dated as of
January 31, 1992, among United (as successor-in-
interest to Associated), the Company (as
successor-in-interest to ASI) and each of
Michael D. Rowsey, Robert W. Eberspacher,
Lawrence E. Miller, Daniel J. Schleppe, Duane J.
Ratay and Daniel H. Bushell (1).
10.22 *1992 Management Stock Option Plan,
dated as of January 31, 1992 (1).
10.23 *Amendment No. 1 to 1992 Management
Stock Option Plan, dated as of March 30, 1995
(1).
10.24 *Letter agreements, dated January
31, 1992, between United (as successor-in-
interest to Associated) and each of Michael D.
Rowsey, Robert W. Eberspacher, Lawrence E.
Miller, Daniel J. Schleppe, Duane J. Ratay and
Daniel H. Bushell regarding grants of stock
options (1).
10.25 *Amendment to Stock Option Grants, dated as
of March 30, 1995, between United (as successor-
in-interest to Associated) and each of Michael
D. Rowsey, Robert W. Eberspacher, Lawrence E.
Miller, Daniel J. Schleppe, Duane J. Ratay and
Daniel H. Bushell (1).
10.26 *Executive Stock Purchase Agreements,
dated as of January 31, 1992, among United (as
successor-in-interest to Associated) Wingate
Partners, ASI Partners, L.P. and each of Michael
D. Rowsey, Robert W. Eberspacher, Lawrence E.
Miller and Daniel J. Schleppe (1).
10.27 *First Amendments to Executive Stock
Purchase Agreements, dated as of March 30, 1995,
among United (as successor-in-interest to
Associated) Wingate Partners, ASI Partners, L.P.
and each of Michael D. Rowsey, Robert W.
Eberspacher, Lawrence E. Miller and Daniel J.
Schleppe (1).
10.28 *Agreement for Data Processing
Services, dated January 31, 1992, between the
Company (as successor-in-interest to ASI) and
Affiliated Computer Services, Inc. (1).
10.29 *Executive Bonus Plan (3) (Exhibit
10(a)(i)(F) to Registrant's Report on Form 10-K
dated November 17, 1988.
10.30 *Amendment to Executive Bonus Plan
adopted February 13, 1995 (4).
10.31 *Supplemental Benefits Plan as amended
and restated as of July 13, 1988 (3) (Exhibit
10(a)(H)(1) to Registrant's Report on Form 10-K
dated November 17, 1988.
10.32 *Management Incentive Plan (3)
(Exhibit 10(a)(i)(L) to Registrant's Report of
Form 10-K dated November 17, 1988.
10.34 *Amendment to Management Incentive
Plan (3) (Exhibit 10(a)(i)(C)(1) to Registrant's
Report on Form 10-K dated November 23,1994.
10.35 *Amendment to Management Incentive
Plan adopted February 13, 1995 (4).
10.36 *Profit Sharing PluSavings Plan (3)
(Exhibit 10(a)(i)(F)(2)(f) to Registrant's
Report on Form 10-K dated November 20, 1989.
10.37 *United Stationers Supply Co. Pension
Plan as amended (3) (See Registrant's Reports on
Form 10-K for the fiscal years ended August 31,
1985, 1986, 1987 and 1989.
10.38 *Amendment to Pension Plan adopted
February 10, 1995 (4).
10.39 *Amended and Restated Employment and
Consulting Agreement dated April 15, 1993
between Registrant, United and Joel D. Spungin
(3) (Exhibit 10(b) to Registrant's Report on
Form 10-K dated November 22, 1993).
10.40 *Amendment dated February 13, 1995 to
the Amended and Restated Employment and
Consulting Agreement between Registrant, United
and Joel D. Spungin (4).
10.41 *Form of Employment and Consulting
Agreement between Registrant, United and certain
executive officers (3) (Exhibit 10(j) to
Registrant's Report on Form 10-K dated November
19, 1987.
10.42 *Amendment dated February 13, 1995 to
Employment and Consulting Agreement between
Registrant, United and Jerold A. Hecktman (4).
10.43 *Amendment dated February 13, 1995 to
Employment and Consulting Agreement between
Registrant, United and Ted S. Rzeszuto (4).
10.44 *Amendment dated February 13, 1995 to
Employment and Consulting Agreement between
Registrant, United and Otis H. Halleen (4).
10.45 *Amendment dated February 13, 1995 to
Employment and Consulting Agreement between
Registrant, United and Robert H. Cornell (4).
10.46 *Amendment dated February 13, 1995 to
Employment and Consulting Agreement between
Registrant, United and Steven R. Schwarz (4).
10.47 *Employment and Consulting Agreement
dated March 1, 1990 between Registrant, United
and Jeffrey K. Hewson (3) (Exhibit 10(l) to
Registrant's report on Form 10-K dated November
20, 1990).
10.48 *Amendment dated April 10, 1991 of
Employment and Consulting Agreement between
Registrant, United and Jeffrey K. Hewson (3)
(Exhibit 10(l)(i) to Registrant's Report on Form
10-K dated November 25, 1991).
10.49 *Amendment dated September 1, 1994 of
Hewson Employment and Consulting Agreement (3)
(Exhibit 10(e)(ii) to Registrant's Report on
Form 10-K dated November 23, 1994).
10.50 *Amendment to Employment and
Consulting Agreement dated February 13, 1995
between Registrant, United and Jeffrey K. Hewson
(4).
10.51 *Severance Agreement between
Registrant, United and James A. Pribel dated
February 13, 1995 (4).
10.52 *Letter Agreement dated February 13,
1995 between United and Ergin Uskup (4).
10.53 *Form of Director's Agreement to Cash
Out and Cancel Stock Options dated February 13,
1995.
10.54 Form of Employee's Agreement to Cash
Out and Cancel Stock Options dated February 13,
1995.
10.55 *USI Employee Benefits Trust Agreement
dated March 21, 1995 between Registrant and
American National Bank and Trust Company of
Chicago as Trustee (4).
10.56 *USI Bonus Benefits Trust Agreement
dated March 21, 1995 between Registrant and
American National Bank and Trust Company of
Chicago as Trustee.
10.57 Certificate of Insurance covering
directors' and officers' liability insurance
effective November 1, 1994 through November 1,
1995.
10.58 *Amendment to Medical Plan Document
for United (4).
10.59 *United Severance Plan, adopted
February 10, 1995.
21. Subsidiaries of the Registrant
* Incorporated by reference.
(1) Incorporated by reference from Registrant's Form S-
1 filed June 2, 1995.
(2) Incorporated by reference from Registrant's
Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995.
(3) Incorporated by reference from prior
filings as indicated - For Exchange Act filings,
see
SEC File No. 0-10653.
(4) Incorporated by reference from the
Registrant's Schedule 140-9 filed February 21,
1995.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(18) Not applicable.
(19) Not applicable.
(22) Subsidiary of Registrant.
(23) Not applicable.
(25) Not applicable.
(28) Not applicable.
(29) Not applicable.
(B) No reports on Form 8-K were filed by the Registrant during the
last quarter.
The following Form 8-K's were filed subsequent to March 30, 1995:
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.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /S/ Daniel H. Bushell
Daniel H. Bushell
Chief Financial Officer
Dated: June 27, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Capacity Date
/S/ Thomas W. Sturgess Chairman of
the Board of Directors, June 27, 1995
Thomas W. Sturgess President and
Chief Executive Officer
/S/Michael D. Rowsey Executive Vice
PresidentJune 27, 1995
Michael D. Rowsey and a Director
/S/James T. Callier Director June 27, 1995
James T. Callier, Jr.
/S/Daniel J. Good Director June 27, 1995
Daniel J. Good
/S/Frederick B. Hegi Director June 27, 1995
Frederick B. Hegi, Jr.
/S/ Jeffrey K. Hewson Director June 27, 1995
Jeffrey K. Hewson
/S/James A. Johnson Director June 27, 1995
James A. Johnson
/S/Gary G. Miller Director June 27, 1995
Gary G. Miller
/S/Joel D. Spungin Director June 27, 1995
Joel D. Spungin
UNITED STATIONERS INC. AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(In thousands of dollars)
Balance AtAdditions Balance
BeginningCharged to At End
of Period ExpensesDeductionsof Per
iod
Reserve for Doubtful Accounts:
Period ended:
March 30, 1995 * $4,010 $2,510 $1,745(A)$4,775
August 31, 1994 $3,964 $5,750 $5,704(A)$4,010
August 31, 1993 $4,335 $7,316 $7,687(A)$3,964
Sales Returns, Rebates, and Allowances:
Period ended:
March 30, 1995 * $31,293 $43,523$48,371(B)$26,445
August 31, 1994 $25,552 $67,970$62,229(B)$31,293
August 31, 1993 $23,794 $52,593$50,835(B)$25,552
_____
* Reflects the transition period of September 1, 1994 through March 30,
1995
(A) Accounts determined to be uncollectible and charged against reserves,
net of collections on accounts previously written off.
(B) Credit memos issued for sales returns, rebates, and allowances.
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction
Under WhichPercentage
Name of Subsidiary Organizedof Ownership
United Stationers Supply Co. Illinois 100%
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 7-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> MAR-30-1995
<CASH> 14515
<SECURITIES> 0
<RECEIVABLES> 188672
<ALLOWANCES> 0
<INVENTORY> 306741
<CURRENT-ASSETS> 532915
<PP&E> 245051
<DEPRECIATION> 118219
<TOTAL-ASSETS> 711839
<CURRENT-LIABILITIES> 275315
<BONDS> 0
<COMMON> 1861
0
0
<OTHER-SE> 231264
<TOTAL-LIABILITY-AND-EQUITY> 711839
<SALES> 980575
<TOTAL-REVENUES> 980575
<CGS> 773857
<TOTAL-COSTS> 773857
<OTHER-EXPENSES> 201760
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7500
<INCOME-PRETAX> (2542)
<INCOME-TAX> 4692
<INCOME-CONTINUING> (7234)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7234)
<EPS-PRIMARY> (.39)
<EPS-DILUTED> (.39)
</TABLE>
ACORD Certificate of Insurance LS
08124 Issue Date: 06/26/95
Producer:
Mesirow Insurance Serv
350 N. Clark
Chicago, IL 60610
Insured:
United Stationers Inc.
United Stationers Supply
2200 East Golf Road
Des Plaines, IL 60016-1267
This certificate is issued as a matter of information
only and confers no rights upon the certificate
holder. This certificate does not amend, extend or
alter the coverage afforded by the policies below.
Companies affording coverage:
Federal Insurance Company
Coverages:
This is to certify that the policies of insurance
listed below have been issued to the insured named
above for the policy period indicated,
notwithstanding any requirement, term or condition of
any contract or other document with respect to which
this certificate may be issued or may pertain, the
insurance afforded by the policies described herein
is subject to all the terms, exclusions and
conditions of such policies. Limits shown may have
been reduced by paid claims.
Type of Insurance: Directors & Officers Liability
Policy Number: 81200259G
Policy Effective Date: 11/01/94
Policy Expiration Date: 11/01/95
Limits: $25,000,000
$250,000 Deductible
Description of
operations/locations/vehicles/special items: None
Certificate Holder:
United Stationers Supply
2200 East Golf Road
Des Plaines, IL 60016
53
Cancellation:
Should any of the above described policies be cancelled
before the expiration date thereof, the issuing company
will endeavor to mail 30 days written notice to the
certificate holder named to the left, but failure to
mail such notice shall impose no obligation or liability
of any kind upon the company, its agents or
representatives.
Authorized Representative:
James C. Styer
54
DIRECTOR'S AGREEMENT TO
CASH OUT AND CANCEL STOCK OPTIONS ("AGREEMENT")
Pursuant to this Agreement made and effective this 28th
day of February, 1995, between United Stationers Inc.
("Company")
and the undersigned director ("Director"), the Company and
the Director agree as follows:
1. The Director agrees not to exercise any stock option
granted
under the United Stationers Inc. Directors' Stock Option
Plan ("Stock Option Plan") while this Agreement is in effect
and any attempt by the Director to exercise any such stock
option while this Agreement is in effect shall be void.
2. Upon the occurrence of a merger between the Company
and
Associated Holdings, Inc. or one of its affiliates (as defined
in Rule 12b-2 under the Securities Exchange Act of 1934)
("Merger"), the Director shall be entitled to and the Company
shall pay to the Director, with respect to each stock option
grant, an amount equal to the product of (A) the excess, if
any, of $15.50 per share (or such greater amount as shall be
offered to stockholders pursuant to the Tender Offer from
Associated Holdings, Inc.) over the option price of a share
of the Common Stock of the Company ("Share") pursuant to the
terms of the grant, multiplied by (B) the number of Shares to
which the grant pertains.
3. The amount determined under paragraph 2 shall be payable
by
the Company on the third (3rd) business day following the date
on which the Merger occurs, without any reduction for
brokerage commissions or any other expense. Upon the
receipt of such payment, all stock options granted under the
Stock Option Plan shall be cancelled and the Director
hereby waives and releases all rights Director may have
against the Company under the Stock Option Plan.
4. The Director shall be responsible for any federal,
state,
city or other taxes imposed with respect to any payment
made pursuant to this Agreement.
5. This Agreement shall be in effect until June 30, 1995.
6. This Agreement shall be binding upon and inure to
the
benefit of the Director and the Company and their
respective heirs, personal representatives and permitted
assigns.
7. This Agreement constitutes the entire agreement between
the
parties hereto and contains all the agreements between
such parties with respect to the subject matter hereof. No
change or modification of or any waiver of the provisions of
this Agreement shall be valid unless the same shall be in
writing and signed by the Director and an authorized
representative of the Company other than the Director.
8. This Agreement may be executed in multiple
counterparts,
each of which shall be deemed an original and all of which
taken together shall constitute a single instrument.
United Stationers Inc.
By:
Director Vice President,
Secretary
and
General Counsel
50
AGREEMENT TO
CASH OUT AND CANCEL STOCK OPTIONS ("AGREEMENT")
Pursuant to this Agreement made and effective this 28th
day of February, 1995, between United Stationers Inc.
("Company") and the undersigned stock option holder
("Optionee"), the Company and the Optionee agree as follows:
1. The Optionee agrees not to exercise any stock
option
granted under the United Stationers Inc. 1981 Stock
Incentive Award Plan or the United Stationers Inc. 1985
Nonqualified Stock Option Plan (referred to individually and
collectively as the "Stock Option Plan") while this
Agreement is in effect and any attempt by the Optionee to
exercise any such stock option while this Agreement is in
effect shall be void.
2. Upon the occurrence of a merger between the Company
and
Associated Holdings, Inc. or one of its affiliates (as defined in
Rule 12b-2 under the Securities Exchange Act of 1934) ("Merger"),
the Optionee shall be entitled to and the Company shall pay to
the Optionee, with respect to each stock option grant (including
stock options not then currently exercisable or subject to
forfeiture and regardless of any restriction or condition to
which any option may be subject pursuant to the Stock Option Plan
or the terms of the grant, but excluding any stock options
which have been forfeited due to termination of employment
prior to the date of the Merger), an amount equal to the
product of (A) the excess, if any, of $15.50 per share (or
such greater amount as shall be offered to stockholders
pursuant to the Tender Offer from Associated Holdings, Inc.)
over the option price of a share of the Common Stock of the
Company ("Share") pursuant to the terms of the grant,
multiplied by (B) the number of Shares to which the grant
pertains.
3. If any stock option granted to the Optionee
would
lapse by reason of the Optionee's failure to exercise during
the period this Agreement is in effect, such options shall not
lapse during the time this Agreement is in effect, and the
Optionee shall be entitled to and the Company shall pay to
the Optionee, with respect to each such stock option
grant the amounts described in paragraph 2 above.
4. The amount determined under paragraph 2 shall
be
payable by the Company on the third (3rd) business day
following the date on which the Merger occurs, without any
reduction for brokerage commissions or any other expense
other than taxes as provided in paragraph 5 below. Upon the
receipt of such payment, all stock options granted under the
Stock Option Plan shall be cancelled and the Optionee hereby
waives and releases all rights Optionee may have against the
Company under the Stock Option Plan.
5. The Optionee shall be responsible for any
federal,
state, city or other taxes imposed with respect to any
payment made pursuant to this Agreement. The Company shall
comply with the obligations imposed under applicable federal,
state or city withholding laws with respect to any payment
under this Agreement and shall be entitled to do any act or
thing to effectuate compliance by Optionee and the Company
with such laws including withholding any amounts payable
pursuant to this Agreement.
51
6. This Agreement shall be in effect until June
30,
1995.
7. This Agreement shall be binding upon and inure
to
the benefit of the Optionee and the Company and their
respective
heirs, personal representatives and permitted assigns.
8. This Agreement constitutes the entire agreement
between the parties hereto and contains all the agreements between
such parties with respect to the subject matter hereof. No change
or modification of or any waiver of the provisions of this Agreement
shall be valid unless the same shall be in writing and signed by
the Optionee and an authorized representative of the Company
other than the Optionee.
9. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all
of which taken together shall constitute a single instrument.
United Stationers Inc.
By:
Optionee - Signature
Vice
President, Secretary and
General Counsel
____________________________________
Typed or Printed Name
52
