<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 8-K / A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH
30, 1995
UNITED STATIONERS INC.
(Exact name of registrant as specified in its
charter)
DELAWARE 0-10653
36-3141189
(State or other jurisdiction (Commission (IRS
Employer
of incorporation) File Number)
Identification No.)
2200 EAST GOLF ROAD
DES PLAINES, ILLINOIS 60016-1267
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code: (708) 699-
5000
THIS FORM 8-K CONSISTS OF 46 PAGES WITH THE INDEX TO EXHIBITS
APPEARING ON
PAGE 46.
<PAGE>
ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
THE ACQUISITION
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"), Associated purchased
17,201,839 shares of
Common Stock, $0.10 par value (the "Shares"), of the Company at a
net purchase
price of $15.50 per share, or approximately $266.6 million in the
aggregate,
from the Company's stockholders in accordance with the terms of
its tender offer
(the "Offer") that expired on March 22, 1995. 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 "Subsidiary Merger" and, together with the
Merger, the
"Mergers"). The time which the Mergers became effective is
referred to herein as
the "Effective Time," and the acquisition of the Shares by
Associated pursuant
to the Offer together with the Mergers is referred to herein as
the
"Acquisition." For a discussion of the financing of the
Acquisition, see
"Financing the Acquisition" and "Ownership of Voting Securities."
At the Effective Time of the Merger, (i) each Share (other
than those
Shares owned by Associated or its affiliates (the "Associated-
Owned Shares"),
Shares held by the Company or its subsidiaries (the "Treasury
Shares") (which
were canceled) and Shares as to which statutory appraisal rights
were validly
exercised and perfected in respect of the Merger and not
withdrawn (the
"Dissenting Shares")) remained outstanding and unaffected by the
Merger, (ii)
each share of common stock, $0.01 par value (the "Associated
Common Stock")
outstanding immediately prior to the Merger was converted into
3.446286 Shares
and each warrant or option to acquire shares of Associated Common
Stock
outstanding immediately prior to the Merger was converted into
the right to
purchase 3.446286 Shares for each share of Associated Common
Stock into which
such warrant or option was exercisable immediately prior to the
Merger, (iii)
each outstanding share of class A preferred stock, $0.01 par
value, of
Associated was converted into one share of Series A Preferred
Stock, $0.01 par
value (the "Series A Preferred Stock"), of the Company, (iv) each
outstanding
share of class B preferred stock, $0.01 par value, of Associated
was converted
into one share of Series B Preferred Stock, $0.01 par value (the
"Series B
Preferred Stock"), of the Company, and (v) each outstanding share
of class C
preferred stock, $0.01 par value, of Associated was converted
into one share of
Series C Preferred Stock, $0.01 par value (the "Series C
Preferred Stock"), of
the Company. In addition, prior to consummation of the Merger,
the Company made
adjustments to all stock options held by executive officers and
directors of the
Company such that such options were terminated at the Effective
Time, with the
holders thereof being entitled to receive cash in settlement
thereof.
2
<PAGE>
Immediately following the Merger, the number of
outstanding Shares was
5,857,923 (or 6,973,720 on a fully-diluted basis), of which (i)
the former
holders of Associated Common Stock and warrants or options to
purchase
Associated Common Stock in the aggregate owned 4,463,179 Shares
constituting
approximately 76.2% of the outstanding Shares and outstanding
warrants or
options for 1,115,797 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 23.8% of the outstanding Shares (or 20.0% on a
fully-diluted
basis).
Upon consummation of the Merger, pursuant to the terms of
the Merger
Agreement, seven of the nine directors of the Company serving
prior thereto were
replaced by nominees designated by Associated. Such directors
designated by
Associated comprise the persons who were the directors of
Associated prior to
the Acquisition. See "Management."
Prior to the Acquisition, Associated, through its wholly-
owned
subsidiary, ASI, was engaged in the wholesale distribution of a
broad line of
office products. Associated and ASI were formed in January 1992
and August 1991,
respectively, by Wingate Partners, L.P., a Delaware limited
partnership
("Wingate Partners").
FINANCING THE ACQUISITION
GENERAL
The total amount of funds required by Associated to
consummate the
Acquisition, buy out the Company stock options, refinance certain
existing
indebtedness of USSC and ASI and pay related fees and expenses
was approximately
$558.5 million. In order to finance such amount, Associated, ASI,
the Company
and USSC entered into (i) the New Credit Facilities (as
hereinafter defined)
with a group of banks and financial institutions led by The Chase
Manhattan Bank
(National Association) ("Chase Bank") 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 with The Roebling Fund,
whose investors
comprise a group of banks and financial institutions, including
Chase Bank, in
the aggregate principal amount of $130.0 million (the
"Subordinated Bridge
Facility"). In connection with the Acquisition, aggregate
proceeds of
approximately $416.5 million under the New Credit Facilities,
together with the
$130.0 million in proceeds of the loan (the "Bridge Loan") under
the
Subordinated Bridge Facility made by certain lenders to finance
the purchase of
a portion of the Shares in the Offer, were used to (i) finance
the purchase of
Shares pursuant to the Offer, (ii) refinance certain existing
indebtedness of
ASI, the Company and USSC, (iii) terminate the Company stock
options, and (iv)
pay certain of the fees, expenses and financing costs relating to
the
Acquisition. In addition, simultaneously with the consummation of
the Offer,
Associated obtained $12.0 million from the sale of additional
shares of
Associated Common Stock to certain existing holders of Associated
Common Stock
or warrants to purchase Associated Common Stock, which was used
to finance in
part the purchase of Shares pursuant to the Offer. See "Financing
the
3
<PAGE>
Acquisition -- Equity Investment." The aggregate proceeds under
the New Credit
Facilities consist of $125.0 million under the Tranche A Facility
(as
hereinafter defined), $75.0 million under the Tranche B Facility
(as hereinafter
defined) and approximately $216.5 million under the Revolving
Credit Facility
(as hereinafter defined).
The following table sets forth the approximate amounts and
sources and
uses of funds that were necessary to consummate the Offer and the
Merger:
<TABLE>
<CAPTION>
(DOLLARS IN
THOUSANDS)
<S>
<C>
Sources:
New Credit Facilities(1)
...................................... $416,537
Subordinated Bridge Facility ...............................
130,000
Equity Investment
............................................. 12,000
- --------
Total Sources
.............................................. $558,537
========
Uses:
Purchase Shares
............................................... $266,629
Refinance Existing USSC Debt
.................................. 180,752
Refinance Existing ASI Debt
................................... 78,856
Estimated Fees and Expenses(2)
................................ 29,300
Other(3)
...................................................... 3,000
- --------
Total Uses
................................................. $558,537
========
</TABLE>
______________
(1) Includes borrowings of approximately $206.8 million at the
time of
consummation of the Acquisition and approximately $9.7
million of additional
revolving loan borrowings used to pay fees and expenses after
the
Acquisition.
(2) Excludes approximately $2.6 million borrowed by USSC and $3.2
million
borrowed by ASI prior to closing of the Offer to pay fees and
expenses in
connection with consummation of the Acquisition. These
amounts are included
under "Refinance Existing USSC Debt" and "Refinance Existing
ASI Debt,"
respectively, above.
(3) This amount was used to terminate the Company stock options.
This amount
excludes approximately $3.2 million borrowed by USSC prior to
closing of the
Offer to discharge compensation and other liabilities in
connection with
consummation of the Acquisition. This latter amount is
included under
"Refinance Existing USSC Debt" above.
4
<PAGE>
LOAN FACILITIES
New Credit Facilities. Immediately prior to acceptance for
payment of
Shares in the Offer, Associated and ASI entered into a credit
agreement (the
"New Credit Agreement") with Chase Bank, as agent, and a group of
banks and
financial institutions (including Chase Bank, the "Senior
Lenders"), providing
for (a) a tranche A term loan facility (the "Tranche A Facility")
in an
aggregate principal amount of $125,000,000, (b) a tranche B term
loan facility
in an aggregate principal amount of $75,000,000 (the "Tranche B
Facility" and,
together with the Tranche A Facility, the "Term Loan Facilities")
and (c) a
revolving credit facility (the "Revolving Credit Facility" and,
together with
the Term Loan Facilities, the "New Credit Facilities") in an
aggregate principal
amount of up to $300,000,000, including a $90,000,000 sublimit
available for
issuance of letters of credit. Upon consummation of the Mergers,
the obligations
of Associated and ASI in respect of the New Credit Agreement were
assumed by the
Company and USSC, respectively.
The following is a summary of the principal terms of the
New Credit
Agreement, which summary does not purport to be complete and is
subject to, and
is qualified in its entirety by reference to, all the provisions
of the New
Credit Agreement.
The loans outstanding under the Term Loan Facilities and
the Revolving
Credit Facility bear interest, at USSC's option, equal to (i) the
Base Rate (as
hereinafter defined) plus 2.25% (if the Tranche B Facility) or
1.75% (if either
the Tranche A Facility or the Revolving Credit Facility) or (ii)
LIBOR (as
defined in the New Credit Agreement), based on one, two, three or
six month
periods, provided that until the date 90 days after the Merger
Date (as defined
in the New Credit Agreement), each interest period shall be one
month and shall
be coterminous with other outstanding LIBOR loans, plus 3.25% (if
the Tranche B
Facility) or 2.75% (if the Tranche A Facility or the Revolving
Credit Facility),
with the applicable margins for all but the Tranche B Facility
being subject to
reductions based on a debt to cash flow ratio test.
Amounts outstanding under the Tranche A Facility are
required to be
repaid in 20 consecutive quarterly installments, the first four
of which (each
in the aggregate principal amount of $3,750,000) will be due on
the last day of
each of the first four calendar quarters commencing with the
quarter ending June
30, 1995. Subsequent quarterly payments under the Tranche A
Facility are each in
the aggregate principal amount of $6,250,000 for each of the
eight consecutive
calendar quarters commencing with the quarter ending June 30,
1996 and
$7,500,000 for each of the eight consecutive calendar quarters
commencing with
the quarter ending June 30, 1998. Amounts outstanding under the
Tranche B
Facility will be repaid in 28 consecutive quarterly installments,
the first
twenty of which (in the aggregate principal amount of $250,000
each) will be due
on the last day of each of the first twenty calendar quarters
5
<PAGE>
commencing with the quarter ending June 30, 1995. The remaining
eight
installments in the aggregate principal amount of $8,750,000 each
will be due on
the last day of each calendar quarter commencing with the quarter
ending June
30, 2000. The final installments under the Tranche A Facility and
the Tranche B
Facility will be payable on March 31, 2000 and March 31, 2002,
respectively. The
Revolving Credit Facility will mature on March 31, 2000.
The Revolving Credit Facility is subject to (i) a
borrowing base equal to
80% of Eligible Receivables (as defined in the New Credit
Agreement) plus 50% of
Eligible Inventory (as defined in the New Credit Agreement)
(provided that no
more than 60% or, during certain periods 65%, of the Borrowing
Base may be
attributable to Eligible Inventory) plus the aggregate amount of
cover for
Letter of Credit Liabilities (as defined in the New Credit
Agreement) and (ii)
the requirement that, for each fiscal year commencing January 1,
1996, USSC must
repay revolving loans so that for a consecutive period of 30 days
in each fiscal
year the aggregate revolving loans do not exceed $200,000,000.
Loans under the Term Loan Facilities and the Revolving
Credit Facility
may be prepaid at any time and are subject to certain mandatory
prepayments out
of (i) net proceeds in excess of $15,000,000 received from the
issuance of
equity by USSC or any of its subsidiaries after the Merger Date
(as defined in
the New Credit Agreement), (ii) net proceeds from certain asset
sales in excess
of $10,000,000 and (iii) 50% of USSC's Excess Cash Flow (as
defined in the New
Credit Agreement) if the Debt to Cash Flow Ratio (as defined in
the New Credit
Agreement) as of the last day of the fiscal year is less than 3
to 1 and
otherwise 75% of USSC's Excess Cash Flow. Optional prepayments
under the Term
Loan Facilities will be applied, pro rata to loans outstanding
under the Tranche
A Facility and the Tranche B Facility (pro rata to the remaining
installments).
Mandatory prepayments will be applied first, pro rata to loans
outstanding under
the Tranche A Facility and the Tranche B Facility (pro rata to
the remaining
installments), and second, to the permanent reduction of
commitments (and the
payment of loans outstanding) under, the Revolving Credit
Facility.
The Term Loan Facilities and the Revolving Credit Facility
are
guaranteed, on a joint and several basis, by the Company and will
be guaranteed
by all of the direct and indirect domestic subsidiaries of USSC
(if any).
The Term Loan Facilities and the Revolving Credit Facility
are secured by
perfected first priority pledges of the stock of USSC, all of the
stock of the
domestic direct and indirect subsidiaries of USSC and certain of
the stock of
all of the foreign direct and indirect subsidiaries of USSC and
security
interests in and liens upon all accounts receivable, inventory,
contract rights
and other personal and real property of USSC and its domestic
subsidiaries.
The New Credit Agreement contains representations and
warranties,
affirmative and negative covenants and events of default
customary for
financings of the type. USSC intends
6
<PAGE>
to obtain the consent of the requisite percentage of Senior
Lenders under the
New Credit Agreement to permit the redemption of certain shares
of preferred
stock of the Company.
The Company and USSC are obligated under the New Credit
Agreement to pay
the costs and expenses arising in connection with the
preparation, execution,
and delivery of the New Credit Agreement and to indemnify the
Senior Lenders
(and their respective officers, directors, employees and
affiliates) against
certain liabilities in connection with the Acquisition and the
New Credit
Facilities.
Subordinated Bridge Facility. Immediately prior to the
acceptance for
payment of Shares in the Offer, Associated and ASI entered into
the Subordinated
Bridge Facility with The Roebling Fund, as agent and lender, and
Chase Bank, as
lender, providing for the Bridge Loan to ASI in an aggregate
principal amount of
$130,000,000. Upon consummation of the Mergers, the obligations
of Associated
and ASI in respect of the Subordinated Bridge Facility were
assumed by the
Company and USSC, respectively. The Subordinated Bridge Facility
is anticipated
to be refinanced in full from a portion of the proceeds of the
sale by USSC of
senior subordinated notes.
The Subordinated Bridge Facility will mature on March 30,
1996 but,
subject to certain conditions, is convertible by USSC into
Rollover Loans (as
defined in the Subordinated Bridge Facility) maturing in 2005.
The Subordinated
Bridge Facility bears interest at the Base Rate plus the
applicable margin. The
"Base Rate" means the higher of (1) the prime commercial lending
rate of Chase
Bank and (2) the federal funds rate plus 1/2 of 1%. The
applicable margin for
the Subordinated Bridge Facility is 4% initially, increasing by
1/2 of 1% at the
end of each three month period ending after the closing of the
Subordinated
Bridge Facility. Interest will be payable quarterly in arrears.
Loans under the Subordinated Bridge Facility are subject
to certain
mandatory prepayments out of (i) net proceeds from the issuance
of subordinated
debt or equity securities by USSC or any of its subsidiaries and
(ii) net
proceeds from asset sales (subject to exceptions), limited in the
case of clause
(ii) to the amount in excess of the amount thereof required to be
paid to the
Senior Banks or to reduce commitments under the New Credit
Facilities.
7
<PAGE>
The Subordinated Bridge Facility is not secured and is
subordinated in
right of payment to the New Credit Facilities. The Subordinated
Bridge Facility
is guaranteed by the Company, subject to the same subordination
provisions
described above.
The definitive agreement for the Subordinated Bridge
Facility includes
representations and warranties, affirmative and negative
covenants and events of
default customary for financings of this type.
EQUITY INVESTMENT
Associated obtained $12,000,000 prior to the consummation
of the Offer
from the sale of additional shares of Associated Common Stock to
Wingate
Partners, Wingate Partners II, L.P., a Delaware limited
partnership ("Wingate
II"), certain affiliates thereof, Chase Manhattan Investment
Holdings, Inc.
("CMIHI"), and other holders of Associated Common Stock, which
amount was used
to finance in part the purchase of Shares pursuant to the Offer.
FEES AND EXPENSES
An aggregate of approximately $35.1 million of fees and
expenses was
incurred by Associated and the Company in connection with the
Acquisition. Such
amounts include usual and customary fees and expenses for
accounting, lending,
financial advisory, dealer-manager, legal, printing, appraisal,
consulting and
related services, a substantial portion of which will be paid to
Chase Bank and
its affiliates.
8
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
In connection with the consummation of the Acquisition,
pursuant to the
terms of the Merger Agreement, seven of the nine directors of the
Company and
all but one of the five directors of USSC 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 currently serving as members of the Boards of Directors
and as executive
officers of the Company and USSC.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas W. Sturgess...... 44 Director and Chairman of the Board
of the Company
and USSC
Jeffrey K. Hewson....... 51 Director, President and Chief
Executive Officer
of the Company and USSC
Michael D. Rowsey....... 42 Director and Executive Vice
President of the
Company and USSC
Steven R. Schwarz....... 41 Director of USSC; Executive Vice
President of the
Company and USSC
Daniel H. Bushell....... 43 Director and Vice President of
USSC; Chief
Financial Officer and Assistant
Secretary of the
Company and USSC
Gary G. Miller.......... 44 Director of the Company; Vice
President and
Secretary of the Company and USSC
James T. Callier, Jr.... 59 Director of the Company
Daniel J. Good.......... 54 Director of the Company
Frederick B. Hegi, Jr... 51 Director of the Company
James A. Johnson........ 40 Director of the Company; Assistant
Secretary of
the Company and USSC
Joel D. Spungin......... 56 Director of the Company
</TABLE>
Set forth below is a description of the backgrounds of the
directors and
executive officers of the Company and USSC. There is no family
relationship
between any directors or executive officers of the Company or
USSC.
THOMAS W. STURGESS became Chairman of the Board of
Directors of the
Company and USSC 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
9
<PAGE>
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").
JEFFREY K. HEWSON became President and Chief Executive
Officer of the
Company and USSC upon consummation of the Merger. Prior thereto,
he was
President and Chief Operating Officer of the Company and USSC
since April 1991.
He had been Executive Vice President of the Company and USSC
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.
MICHAEL D. ROWSEY was elected to the Board of Directors of
the Company
and USSC upon consummation of the Offer and became Executive Vice
President of
the Company and USSC 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 the Wholesale
Division of Boise
Cascade Office Products Corporation (predecessor of ASI), most
recently as the
North Regional Manager.
STEVEN R. SCHWARZ was elected to the Board of Directors of
USSC upon
consummation of the Offer and became Executive Vice President of
the Company and
USSC upon consummation of the Merger. Prior thereto, he was
Senior Vice
President, Marketing of the Company since June 1992 and had
previously been
Senior Vice President, General Manager of the Company's
MicroUnited Division
("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.
DANIEL H. BUSHELL was elected to the Board of Directors of
USSC upon
consummation of the Offer and became Chief Financial Officer and
Assistant
Secretary of the Company and USSC and Vice President of USSC upon
consummation
of the Merger. Prior thereto, Mr. Bushell had been Chief
Administrative and
Chief Financial Officer of Associated and ASI since January 1992.
From 1978 to
January 1992, Mr. Bushell served in various capacities with ACE
Hardware
Corporation, most recently as Vice President of Finance.
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
and
10
<PAGE>
USSC 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., 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 Holding
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.
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
11
<PAGE>
general partner of each of Wingate II and Wingate Affiliates II,
L.P. From 1980
until he joined Wingate Partners in 1990, Mr. Johnson served as a
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 USSC, and Chairman of the Board of
Directors of the
Company and USSC and prior to the Merger was Chief Executive
Officer of the
Company and USSC since August 1988. From October 1989 until April
1991, he was
also President of the Company and USSC. Prior to that, since
March 1987, Mr.
Spungin was Vice Chairman of the Board and Chief Executive
Officer of the
Company and USSC. Previously, since August 1981, Mr. Spungin was
President and
Chief Operating Officer of the Company and USSC. He also serves
as a director of
AAR Corp.
Approximately 77% of the Shares outstanding are held in a
voting trust
(the "Voting Trust") pursuant to a Voting Trust Agreement dated
as of January
31, 1992, as amended (the "Voting Trust Agreement"). The trustees
of the Voting
Trust are Thomas W. Sturgess, Frederick B. Hegi, Jr., James A.
Johnson, Daniel
J. Good and Gary G. Miller. The trustees of the Voting Trust hold
all voting
power to vote the Shares held in the Voting Trust and may act by
a majority vote
of the trustees. The trustees agree to vote all Shares in trust
to elect a board
of directors of the Company with (i) a least one representative
designated by
Good Capital, (ii) at least one representative designated by ASI
Partners, L.P.,
the general partner of which is Cumberland, (iii) at least one
representative
designated by certain key executives (consisting of Michael D.
Rowsey, Robert W.
Eberspacher, Daniel J. Schleppe and Lawrence E. Miller) of the
Company and (iv)
such number of directors designated by Wingate Partners as will
represent a
majority of the total number of directors. The Voting Trust
terminates on
January 31, 2002 or upon the consummation of an underwritten
public offering of
the Shares which meets certain criteria specified in the Voting
Trust Agreement.
The Voting Trust Agreement does not apply to the election of
directors of USSC,
although by virtue of the power to elect the directors of the
Company the
trustees of the Voting Trust will indirectly have the power to
elect the
directors of USSC. Officers of the Company and USSC are elected
by their
respective Boards of Directors and hold office until their
respective successors
are duly elected and qualified.
The Company's Restated Certificate of Incorporation
provides that the
Board of Directors of the Company shall be divided into three
classes, each
class as nearly equal in number as possible, and each term
consisting of three
years. The Directors currently in each class are as follows:
Class I (having
terms expiring in 1996) - Messrs. Good, Johnson and Hewson; Class
II (having
terms expiring in 1997) - Messrs. Sturgess, Hegi and Rowsey; and
Class III
(having terms expiring in 1998) - Messrs. G. Miller, Callier and
Spungin.
12
<PAGE>
OWNERSHIP OF VOTING SECURITIES
The following table sets forth, based on information
available to the
Company as of March 30, 1995, certain information regarding the
beneficial
ownership of the Common Stock and the Series A, Series B and
Series C Preferred
Stock of the Company by (i) each person who is known to the
Company to
beneficially own more than 5% of any class of the Company's
capital stock, (ii)
each of the directors of the Company and USSC, (iii) certain
executive officers
of the Company and USSC, and (iv) all current directors and
executive officers
of the Company and USSC as a group.
<TABLE>
<CAPTION>
Common Stock(1)
Series A Preferred(2) Series B Preferred(2)
-------------------------- -
- --------------------- ----------------------
Directors, Executive Number Percent
Number Percent Number Percent
Officers And Of Of
Of Of Of Of
5.0% Stockholders Shares Class(3)
Shares Class(3) Shares Class(3)
- ---------------------------------- -------------- ---------- -
- --------- ---------- ---------- ----------
<S> <C> <C>
<C> <C> <C> <C>
Wingate Partners, L.P............. 2,788,095(4) 45.92%
3,148(5) 62.96% -- --%
750 N. St. Paul Street
Suite 1200
Dallas, Texas 75201
ASI Partners, L.P................. 870,444(6) 14.86
1,212(7) 24.24 -- --
301 Commerce Street
Suite 3300
Fort Worth, Texas 76102
Cumberland Capital Corporation.... 870,444(6) 14.86
1,212(7) 24.24 -- --
301 Commerce Street
Suite 3300
Fort Worth, Texas 76102
Boise Cascade Corporation......... 281,844(8) 4.75
- -- -- 6,724 100.00
One Jefferson Square
Boise, Idaho 83702
Chase Manhattan Investment
Holdings, Inc.................... 617,254(9) 10.13
- -- -- -- --
1 Chase Manhattan Plaza
New York, New York 10081
Affiliated Computer Services...... -- --
- -- -- -- --
2828 North Haskell Avenue
Dallas, Texas 75204
Thomas W. Sturgess(10)............ -- --
- -- -- -- --
Gary G. Miller(11)................ -- --
- -- -- -- --
Daniel J. Good.................... 102,434(12) 1.38
- -- -- -- --
Jeffrey K. Hewson................. 1,039 *
- -- -- -- --
Michael D. Rowsey(13)............. 58,935(14) 1.00
55 1.09 -- --
Daniel J. Schleppe(13)............ 56,462(15) *
55 1.09 -- --
Steven R. Schwarz................. 315 *
- -- -- -- --
Daniel H. Bushell................. 23,912(16) *
- -- -- -- --
James T. Callier, Jr. (10)........ -- --
- -- -- -- --
Frederick B. Hegi, Jr.(10)........ -- --
- -- -- -- --
James A. Johnson(10)(13).......... 9,586 *
15 * -- --
Joel D. Spungin................... 6,686(17) *
- -- -- -- --
Robert W. Eberspacher(13)......... 55,119(18) *
55 1.09 -- --
All current directors and
executive officers as a
group (11) persons)(12)-(19)..... 3,023,904(19) 49.29
233 4.66 -- --
<CAPTION>
Series C Preferred(2)
----------------------
Directors, Executive Number Percent
Officers And Of Of
5.0% Stockholders Shares Class(3)
- ---------------------------------- ---------- ----------
<S> <C> <C>
Wingate Partners, L.P............. -- --%
750 N. St. Paul Street
Suite 1200
Dallas, Texas 75201
ASI Partners, L.P................. -- --
301 Commerce Street
Suite 3300
Fort Worth, Texas 76102
Cumberland Capital Corporation.... -- --
301 Commerce Street
Suite 3300
Fort Worth, Texas 76102
Boise Cascade Corporation......... -- --
One Jefferson Square
Boise, Idaho 83702
Chase Manhattan Investment
Holdings, Inc.................... -- --
1 Chase Manhattan Plaza
New York, New York 10081
Affiliated Computer Services...... 10,087 100.00
2828 North Haskell Avenue
Dallas, Texas 75204
Thomas W. Sturgess(10)............ -- --
Gary G. Miller(11)................ -- --
Daniel J. Good.................... -- --
Jeffrey K. Hewson................. -- --
Michael D. Rowsey(13)............. -- --
Daniel J. Schleppe(13)............ -- --
Steven R. Schwarz................. -- --
Daniel H. Bushell................. -- --
James T. Callier, Jr. (10)........ -- --
Frederick B. Hegi, Jr.(10)........ -- --
James A. Johnson(10)(13).......... -- --
Joel D. Spungin................... -- --
Robert W. Eberspacher(13)......... -- --
All current directors and
executive officers as a
group (11) persons)(12)-(19)..... -- --
</TABLE>
_________________
* Represents less than 1.0%.
13
<PAGE>
(1) All Shares shown in the table, other than Shares
beneficially owned by
CMIHI, are held in the Voting Trust pursuant to the Voting
Trust Agreement.
See "Management -- Directors and Executive Officers." The
trustees of the
Voting Trust are Messrs. Sturgess, Hegi, Johnson, Good and
G. Miller.
(2) Except under limited circumstances, the holders of the
Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock
are not
entitled to vote. See "Description of Capital Stock --
Voting Rights."
(3) For purposes of calculating the beneficial ownership of each
stockholder,
it was assumed (in accordance with the Commission's
definition of
"beneficial ownership") that such stockholder had exercised
all options or
warrants by which such stockholder had the right, within 60
days following
March 30, 1995, to acquire shares of such class of stock.
(4) Includes (i) 2,078,068 Shares owned by Wingate Partners,
(ii) 452,898
Shares owned by Wingate II, (iii) 36,071 Shares owned by
Wingate Affiliates
and (iv) 7,828 Shares owned by Wingate Affiliates II, L.P.
Also includes
warrants exercisable for an aggregate of 213,230 Shares (or
shares of
Nonvoting Common Stock, $0.01 par value, of the Company
("Nonvoting Common
Stock"), at the holder's option) purchased by such entities
from one of
Associated's former senior lenders.
(5) Includes (i) 3,094 Shares owned by Wingate Partners and (ii)
54 Shares
owned by Wingate Affiliates.
(6) Includes (i) 715,226 Shares owned by ASI Partners, L.P.,
(ii) 78,152 Shares
owned by ASI Partners II, L.P. and (iii) 77,066 Shares owned
by Cumberland.
Cumberland serves as the general partner of both ASI
Partners, L.P. and ASI
Partners II, L.P.
(7) Includes 1,212 shares of Series A Preferred Stock owned by
ASI Partners,
L.P., as to which Cumberland serves as general partner.
(8) Includes (i) 202,135 Shares owned by Boise Cascade
Corporation and (ii)
79,709 Shares issuable upon exercise of a warrant.
(9) Consists of 237,757 Shares (or shares of Nonvoting Common
Stock, at the
holder's option) issuable upon exercise of warrants which
are immediately
exercisable at $0.01 per Share and 240,023 shares of
Nonvoting Common Stock
held by such holder and 139,474 shares of Nonvoting Common
Stock to be
issued upon consummation of the Sub-Debt Offering
contemplated hereby. At
the option of the holder, such warrants are to be
exercisable for shares of
Nonvoting Common Stock in lieu of Shares. Subject to certain
restrictions
applicable to nationally chartered bank and bank affiliate,
the Nonvoting
Common Stock is convertible at any time at the option of the
holder into
Shares for no additional consideration.
(10) Does not include shares owned by Wingate Partners, Wingate
II, Wingate
Affiliates or Wingate Affiliates II, L.P. Each of Messrs.
Sturgess, Hegi
and Callier is a general partner of Wingate Affiliates, and
an indirect
general partner of Wingate Partners and, accordingly, may be
deemed to
beneficially own the Shares owned of record by Wingate
Partners and Wingate
Affiliates. Each of Messrs. Sturgess, Hegi and Johnson is a
general partner
of Wingate Affiliates II, L.P. and an indirect general
partner of Wingate
II and, accordingly, may be deemed to beneficially own the
Shares owned of
record by Wingate II and Wingate Affiliates II, L.P.
(11) Does not include shares owned by ASI Partners, L.P., ASI
Partners II, L.P.
or Cumberland. Mr. Miller is President and a stockholder of
Cumberland and,
accordingly, may be deemed to beneficially own the shares
owned of record
by ASI Partners, L.P., ASI Partners II, L.P. and Cumberland.
(12) Includes warrants exercisable for an aggregate of 21,953
Shares (or shares
of Nonvoting Common Stock, at the holder's option) purchased
by Mr. Good
from one of Associated's former senior lenders. Does not
include 181,956
Shares owned by Good Capital. Mr. Good is Chairman and a
controlling
stockholder of Good Capital and, accordingly, may be deemed
to beneficially
own the shares owned of record by Good Capital.
(13) Includes Shares owned directly and by an individual
retirement account for
the sole benefit of such individual.
(14) Includes (i) 42,137 Shares owned by or for the benefit of
Mr. Rowsey and
(ii) 16,298 Shares issuable upon exercise of options which
are, subject to
certain restrictions, immediately exercisable at $2.90 per
share.
(15) Includes (i) 42,221 Shares owned by or for the benefit of
Mr. Schleppe and
(ii) 14,241 Shares issuable upon exercise of options which
are, subject to
certain restrictions, immediately exercisable at $2.90 per
share.
14
<PAGE>
(16) Includes (i) 9,553 Shares owned by or for the benefit of Mr.
Bushell and
(ii) 14,359 Shares issuable upon exercise of options which
are, subject to
certain restrictions, immediately exercisable at $2.90 per
share.
(17) Includes (i) 3,217 Shares owned by Mr. Spungin, (ii) an
aggregate of 2,918
Shares owned by trusts and a partnership under Mr. Spungin's
direction and
(iii) an aggregate of 551 Shares owned by relatives of Mr.
Spungin.
(18) Includes (i) 42,050 Shares owned by or for the benefit of
Mr. Eberspacher
and (ii) 13,069 Shares issuable upon exercise of options
which are, subject
to certain restrictions, immediately exercisable at $2.90
per share.
(19) Includes an aggregate of (i) 2,747,179 Shares owned by the
current
directors and executive officers of the Company and USSC,
(ii) 41,452
Shares issuable upon exercise of options which are, subject
to certain
restrictions, immediately exercisable at $2.90 per share and
(iii) 235,183
Shares issuable upon exercise of warrants which are
immediately exercisable
at $0.01 per Share.
15
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) The information set forth in Item 1 above under
"The Acquisition,"
"Financing the Acquisition," "Management" and "Ownership of
Voting Securities"
is incorporated herein by reference.
(b) Since the consummation of the Mergers, USSC has
been engaged in
implementing its consolidation plan to integrate its business
with the business
of ASI. Through the integration of distribution facilities and
product lines in
a manner designed to enable USSC to offer its customers increased
service and
product availability, the Company expects to improve its
competitive position.
In addition, the Company plans to achieve cost savings and other
benefits from
the elimination of redundant or overlapping functions and
facilities and by
minimizing overlapping products.
In implementing its consolidation plan, another
critical objective
will be to maintain and enhance customer relationships, service
and marketing
programs of the combined businesses. The Company and USSC's
management
("Management") believes that the Company's experience integrating
the
acquisition of Stationers Distributing Company, Inc., together
with Associated's
experience integrating the acquisition of Lynn-Edwards Corp.,
each in 1992, will
enhance the Company's ability to implement its strategy
methodically and
effectively while maintaining competitive levels of customer
service.
Management anticipates that the implementation of
its
consolidation strategy should result in significant cost savings
and synergies
which will enhance the Company's financial and operational
performance.
Management estimates that, upon phase-in of its consolidation
plan over a 12-
month period following the Acquisition, the Company expects to
realize
approximately $26.0 million per year in savings as a result of
the successful
implementation of its consolidation plan, although the
Acquisition is likely to
result in a reduction in rate of revenue growth for some period
following the
Acquisition as a result of the total or partial loss of some
customers to
competition.
Consolidate Number of Product Offerings and
Increase Volume.
Management plans to consolidate the Company's product offerings
by eliminating
approximately 10,000 overlapping items from the catalogs that
Management expects
will be distributed in the fourth calendar quarter of 1995, while
at the same
time, adding more niche products, including more specialty items.
In addition,
following the Acquisition, USSC is expected to have substantially
greater sales
volume than either ASI or USSC separately prior to the
Acquisition. Management
believes that the Company will benefit by being able to (i)
qualify for improved
terms with vendors as a result of placing higher volume purchases
among fewer
suppliers, (ii) offer a more diverse product line, thereby
enhancing end user
purchasing options and (iii) achieve higher fill rates as a
result of greater
inventory and warehousing capacity.
16
<PAGE>
Consolidate Distribution Centers. Management has
identified eight
redundant distribution centers between ASI and the USSC prior to
the Merger and
plans to close such redundant facilities within 12 months of the
Merger.
Management believes that the Company will benefit by achieving
cost reductions
arising from the elimination of such facilities. After the
elimination of such
redundant distribution centers, the aggregate number of
distribution centers
will be 39, which is greater than the number of distribution
centers operated by
either company separately. Management believes that such
increased number of
USSC's distribution centers and, in some markets, the proximity
of distribution
centers to each other, ultimately will improve service levels and
make
additional inventory available through USSC's automated inventory
management
system and, as a result, improve the delivery services of USSC.
In addition, the
Company intends to achieve cost savings from the rationalized
post-Merger
operation of two distributions centers in each of the Chicago,
Sacramento,
Nashville, and Minneapolis/St. Paul market areas, where size of
existing
facilities requires, or demand is sufficient to support, multiple
facilities.
Reduce Corporate Overhead. Management has
identified a number of
corporate positions which it believes can be eliminated in the
Company and plans
to eliminate such positions and to close Associated's corporate
headquarters.
Management believes that the Company will benefit by realizing
savings (phased
in over a 12-month period) from reduced payroll, benefits and
other related
expenses derived from (i) the elimination of such positions, (ii)
the closing of
Associated's corporate headquarters and (iii) the consolidation
of legal, audit
and tax consulting functions of Associated and the Company prior
to the Merger.
Reduce Sales Representatives. Management plans to
eliminate
redundant sales positions where customer coverage overlaps.
Within three months
after the Merger, Management believes that the Company will
benefit by savings
from reduced payroll, benefits and other related expenses derived
from the
elimination of such positions.
Expand Private Brand Products and Off-Shore
Sourcing. Because of
the cost advantages and popularity of the Company's Universal
private brand
products, Management plans to introduce the Universal line and
off-shore sourced
products in the traditional ASI distribution channels as well as
use the
combined volume of the Company after the Merger to enhance the
Company's
ability, when appropriate, to introduce new private brand
products and, as
appropriate, to source certain additional products off-shore.
Management
believes that the Company will benefit from such strategy by
increasing sales of
private brand and off-shore products, which should provide higher
profit margins
to both the reseller and the Company.
17
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) INDEX TO FINANCIAL STATEMENTS
Location
- --------
UNITED STATIONERS INC. AND SUBSIDIARIES
Report of Independent Public
Accountants................................. *
Consolidated Balance Sheets as of August 31, 1994 and August 31,
1993.... *
Consolidated Statements of Income for the years ended August 31,
1994,
August 31, 1993 and August 31,
1992..................................... *
Consolidated Statements of Changes in Stockholders' Investment
for the
years ended August 31, 1994, August 31, 1993 and August 31,
1992........ *
Consolidated Statements of Cash Flows for the years ended August
31,
1994, August 31, 1993 and August 31,
1992............................... *
Notes to Consolidated Financial
Statements............................... *
Condensed Consolidated Balance Sheets as of February 28, 1995
(unaudited)
and August 31, 1994
(audited)........................................... **
Condensed Consolidated Statements of Income for the Three Months
Ended
February 28, 1995 and February 28, 1994 and the Six Months Ended
February 28, 1995 and February 28, 1994
(unaudited)..................... **
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended
February 28, 1995 and February 28, 1994
(unaudited)..................... **
Notes to Condensed Consolidated Financial Statements
(unaudited)......... **
- ---------
* These Consolidated Financial Statements, related Notes and
Report
of Independent Accountants, appearing in the Company's Annual
Report to
Stockholders for the fiscal year ended August 31, 1994, pages 16
through
28, which Report is filed as Exhibit 13(a) to this Form 8-K, are
incorporated
herein by reference.
** These unaudited Condensed Consolidated Financial
Statements and related
Notes, appearing on pages 3 through 7 in the Company's Quarterly
Report on Form
10-Q for the Quarterly Period Ended February 28, 1995, which
Report is filed as
Exhibit 13(b) to this Form 8-K, are incorporated herein by
reference.
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
Report of Independent Public
Accountants................................. 19
Consolidated Balance Sheets as of December 31, 1993 and
1994............. 20
Consolidated Statements of Income for the Period from Inception,
January
31, 1992, through December 31, 1992 and for the Years Ended
December 31,
1993 and
1994...........................................................
21
Consolidated Statements of Stockholders' Equity for the Period
from
Inception, January 31, 1992, through December 31, 1992 and for
the Years
Ended December 31, 1993 and 1994
....................................... 22
Consolidated Statements of Cash Flows for the Period from
Inception,
January 31, 1992, through December 31, 1992 and for the Years
Ended
December 31, 1993 and
1994.............................................. 23
Notes to Consolidated Financial
Statements............................... 24
18
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Associated Holdings, Inc.:
We have audited the accompanying consolidated balance sheets of
ASSOCIATED
HOLDINGS, INC. (a Delaware corporation) AND SUBSIDIARY as of
December 31, 1993
and 1994, and the related consolidated statements of income,
stockholders'
equity and cash flows from inception, January 31, 1992 through
December 31,
1992, and for the years ended December 31, 1993 and 1994. These
financial
statements are the responsibility of the Company's management.
Our
responsibility is to express an opinion on these 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 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 audits provide 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
Associated
Holdings, Inc. and subsidiary as of December 31, 1993 and 1994,
and the results
of their operations and their cash flows from inception, January
31, 1992,
through December 31, 1992, and for the years ended December 31,
1993 and 1994
in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois,
January 23, 1995 (except with
respect to the matters discussed
in Note 13 as to which the date
is February 13, 1995)
19
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------
- ----------
ASSETS 1993
1994
------ -------
- - --------
<S> <C>
<C>
CURRENT ASSETS:
Cash................................................... $
991 $ 1,849
Accounts receivable, less allowance for doubtful
accounts of $4,058 and $4,036, respectively...........
35,320 35,180
Vendor and other receivables...........................
9,691 9,959
Inventories............................................
82,618 88,197
Other current assets...................................
3,053 3,795
-------
- - --------
Total current assets.................................
131,673 138,980
-------
- - --------
PROPERTY, PLANT AND EQUIPMENT:
Land...................................................
7,327 7,315
Buildings..............................................
27,990 27,976
Machinery and equipment................................
18,829 18,875
Furniture and fixtures.................................
4,226 4,111
-------
- - --------
58,372 58,277
Less -- Accumulated depreciation and amortization......
8,747 12,830
-------
- - --------
Net property, plant and equipment....................
49,625 45,447
-------
- - --------
OTHER LONG-TERM ASSETS...................................
9,681 8,052
-------
- - --------
$190,979 $192,479
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C>
<C>
CURRENT LIABILITIES:
Cash overdrafts........................................ $
9,145 $ 9,597
Current maturities of long-term debt...................
4,828 5,901
Accounts payable.......................................
41,400 44,754
Accrued liabilities....................................
16,734 18,994
Other current liabilities..............................
2,264 3,280
-------
- - --------
Total current liabilities............................
74,371 82,526
-------
- - --------
LONG-TERM OBLIGATIONS:
Long-term debt, less current maturities................
71,940 58,279
Deferred obligations and other long-term liabilities...
10,815 2,060
-------
- - --------
Total long-term obligations..........................
82,755 60,339
-------
- - --------
REDEEMABLE PREFERRED STOCK (Note 7):
Preferred Stock A, $0.01 par value; 15,000 authorized;
5,000 issued and outstanding; 1,138 and 1,788,
respectively, accrued.................................
6,138 6,788
Preferred Stock B, $0.01 par value; 15,000 authorized;
5,943 and 6,560, respectively, issued and outstanding.
5,943 6,560
Preferred Stock C, $0.01 par value; 15,000 authorized;
8,915 and 9,841, respectively, issued and outstanding.
8,915 9,841
-------
- - --------
20,996 23,189
-------
- - --------
STOCKHOLDERS' EQUITY (Note 8):
Additional preferred stock, $0.01 par value; 200,000
authorized; 0 issued and outstanding.................. --
- --
Common Stock Class A, $0.01 par value; 5,000,000
authorized; 896,258, and 954,911 respectively, issued
and outstanding; 0 and 5,435, respectively, accrued...
9 10
Common Nonvoting Stock Class B, $0.01 par value;
5,000,000 authorized; 0 issued and outstanding........ --
- --
Capital in excess of par...............................
8,766 17,879
Warrants outstanding and accrued.......................
1,666 1,910
Retained earnings......................................
2,416 6,626
-------
- - --------
Total stockholders' equity...........................
12,857 26,425
-------
- - --------
$190,979 $192,479
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral
part of these statements.
20
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED
THROUGH
DECEMBER 31,
DECEMBER 31, ---
- --------------
1992
1993 1994
------------ ---
- ----- --------
<S> <C> <C>
<C>
NET SALES....................................... $365,944
$462,531 $477,445
COST OF GOODS SOLD.............................. 276,546
350,251 357,276
-------- ---
- ----- --------
Gross profit................................ 89,398
112,280 120,169
-------- ---
- ----- --------
OPERATING EXPENSES:
Warehouse and distribution expenses........... 60,593
78,482 77,859
Selling, general and administrative expenses.. 19,296
23,792 25,161
-------- ---
- ----- --------
79,889
102,274 103,020
-------- ---
- ----- --------
Income from operations...................... 9,509
10,006 17,149
INTEREST EXPENSE................................ 4,782
6,263 6,753
-------- ---
- ----- --------
Income before income taxes.................. 4,727
3,743 10,396
INCOME TAXES.................................... 1,777
781 3,993
-------- ---
- ----- --------
Net income.................................. 2,950
2,962 6,403
PREFERRED STOCK DIVIDENDS ISSUED AND ACCRUED.... 1,449
2,047 2,193
-------- ---
- ----- --------
Net income attributable to common
stockholders' equity....................... $ 1,501 $
915 $ 4,210
========
======== ========
EARNINGS PER COMMON AND DILUTIVE COMMON
EQUIVALENT SHARE............................... $ 1.32 $
0.78 $ 3.51
========
======== ========
EARNINGS PER COMMON SHARE -- ASSUMING FULL
DILUTION....................................... $ 1.32 $
0.78 $ 3.49
========
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral
part of these statements.
21
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
REDEEMABLE NUMBER
CAPITAL
PREFERRED STOCK OF
IN TOTAL
-------------------- COMMON
COMMON EXCESS WARRANTS RETAINED STOCKHOLDERS'
A B C TOTAL SHARES
STOCK OF PAR OUTSTANDING EARNINGS EQUITY
------ ------ ------ ------- ------- --
- ---- ------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
JANUARY 31, 1992........ $5,000 $5,000 $7,500 $17,500 896,258 $
9 $ 7,778 $1,231 $ -- $ 9,018
Net income............. -- -- -- -- -- -
- - -- -- 2,950 2,950
Stock dividends issued
($75.00 per share).... -- 384 577 961 -- -
- - -- -- (961) (961)
Stock dividends accrued
(97.50 per share)..... 488 -- -- 488 -- -
- - -- -- (488) (488)
Payment on notes
receivable from
stockholders.......... -- -- -- -- -- -
- - 947 -- -- 947
Issuance of warrants... -- -- -- -- -- -
- - -- 435 -- 435
------ ------ ------ ------- ------- -
- -- ------- ------ ------ -------
DECEMBER 31, 1992....... 5,488 5,384 8,077 18,949 896,258
9 8,725 1,666 1,501 11,901
Net income............. -- -- -- -- -- -
- - -- -- 2,962 2,962
Stock dividends issued
($100.00 per share)... -- 559 838 1,397 -- -
- - -- -- (1,397) (1,397)
Stock dividends accrued
($130.00 per share)... 650 -- -- 650 -- -
- - -- -- (650) (650)
Payment on notes
receivable from
stockholders.......... -- -- -- -- -- -
- - 41 -- -- 41
------ ------ ------ ------- ------- -
- -- ------- ------ ------ -------
DECEMBER 31, 1993....... 6,138 5,943 8,915 20,996 896,258
9 8,766 1,666 2,416 12,857
Net income............. -- -- -- -- -- -
- - -- -- 6,403 6,403
Stock dividends issued
($100.00 per share)... -- 617 926 1,543 -- -
- - -- -- (1,543) (1,543)
Stock dividends accrued
($130.00 per share)... 650 -- -- 650 -- -
- - -- -- (650) (650)
Payment on notes
receivable from
stockholders.......... -- -- -- -- -- -
- - 51 -- -- 51
Issuance of common
shares................ -- -- -- -- 58,653
1 8,999 -- -- 9,000
Common shares accrued.. -- -- -- -- 5,435 -
- - 63 -- -- 63
Warrants accrued....... -- -- -- -- -- -
- - -- 244 -- 244
------ ------ ------ ------- ------- -
- -- ------- ------ ------ -------
DECEMBER 31, 1994....... $6,788 $6,560 $9,841 $23,189 960,346
$10 $17,879 $1,910 $6,626 $26,425
====== ====== ====== ======= =======
=== ======= ====== ====== =======
</TABLE>
The accompanying notes to consolidated financial statements are
an integral
part of these statements.
22
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED
THROUGH
DECEMBER 31,
DECEMBER 31, ---
- -------------
1992
1993 1994
------------ ---
- ---- -------
<S> <C> <C>
<C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................... $ 2,950 $
2,962 $ 6,403
------- ---
- ---- -------
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities--
Depreciation and amortization............... 5,366
6,475 6,356
Services provided under transition services
agreement.................................. 9,000
- -- --
Provision for noncurrent taxes.............. 1,605
167 250
Common shares accrued....................... --
- -- 63
Warrants accrued............................ --
- -- 244
Changes in assets and liabilities, net of
effects from purchase of Lynn-Edwards for
the eleven months ended December 31, 1992--
(Increase) decrease in accounts
receivable............................... 7,582
(879) 140
Increase in vendor and other receivables.. (6,322)
(2,368) (268)
Increase in inventory..................... (11,111)
(14,998) (5,579)
Increase in other assets.................. (616)
(3,990) (598)
Increase (decrease) in accounts payable... 10,988
(5,493) 3,354
Increase in accrued liabilities........... 4,740
1,381 2,260
(Decrease) increase in other liabilities.. (4,423)
(1,449) 1,011
------- ---
- ---- -------
Total adjustments....................... 16,809
(21,154) 7,233
------- ---
- ---- -------
Net cash provided by (used in) operating
activities............................. 19,759
(18,192) 13,636
------- ---
- ---- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of net assets of BCOP (Note 1).... (82,122)
- -- --
Acquisition of net assets of Lynn-Edwards
(Note 1)..................................... (2,673)
313 --
Acquisition costs............................. (7,712)
(67) --
Capital expenditures.......................... (4,289)
(3,273) (554)
Other......................................... --
(249) --
------- ---
- ---- -------
Net cash used in investing activities... (96,796)
(3,276) (554)
------- ---
- ---- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from initial capitalization--
Revolver.................................... 36,081
- -- --
Long-term debt.............................. 30,000
- -- --
Issuance of common and preferred stock...... 19,325
- -- --
Net borrowings (repayment) under revolver..... 2,230
9,500 (7,900)
Increase in cash overdrafts................... 1,787
6,108 452
Principal payments on debt.................... (8,067)
(3,446) (4,827)
Borrowings under financing agreements......... 2,987
2,000 --
Collections from stockholders................. 947
41 51
------- ---
- ---- -------
Net cash provided by (used in) financing
activities............................. 85,290
14,203 (12,224)
------- ---
- ---- -------
NET CHANGE IN CASH.............................. 8,253
(7,265) 858
CASH, beginning of period....................... 3
8,256 991
------- ---
- ---- -------
CASH, end of period............................. $ 8,256 $
991 $ 1,849
=======
======= =======
</TABLE>
The accompanying notes to consolidated financial statements are
an integral
part of these statements.
23
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA )
1. BASIS OF PRESENTATION:
Associated Holdings, Inc. ("AHI") and Associated Stationers,
Inc. ("ASI"), a
wholly owned subsidiary of AHI, both Delaware corporations
(collectively the
"Company"), were formed to acquire certain assets and assume
certain
liabilities (the "Acquisition") of the Wholesale Division of
Boise Cascade
Office Products Corporation ("BCOP").
The Acquisition was consummated effective January 31, 1992, for
approximately
$87,122, of which $82,122 was paid in cash and $5,000 was paid in
preferred
stock. The transaction was accounted for using the purchase
method of
accounting. Accordingly, the purchase price was allocated to
acquired assets
and liabilities based on their fair market values as of January
31, 1992, as
follows:
<TABLE>
<S>
<C>
Cash and accounts
receivable..................................... $36,774
Inventory........................................................
50,324
Other current
assets............................................. 277
Property, plant and
equipment.................................... 49,150
Accounts
payable................................................. (30,624)
Accrued expenses and other
liabilities........................... (18,779)
- -------
$87,122
=======
</TABLE>
On October 27, 1992, L. E. Acquisition Corp., a wholly owned
subsidiary of
ASI and a Delaware corporation, acquired all of the outstanding
capital stock
of Lynn-Edwards Corp. ("Lynn-Edwards"), a privately held office
products
wholesaler, for approximately $2,360. Lynn-Edwards was
headquartered in
Sacramento, California, and operated distribution centers in
Sacramento and Los
Angeles, California. On October 28, 1992, the L. E. Acquisition
Corp. name was
relinquished and the Lynn-Edwards Corp. name was assumed.
The acquisition of Lynn-Edwards was effective as of September
30, 1992. The
acquisition has been accounted for as a purchase transaction and,
accordingly,
the purchase price was allocated to assets and liabilities based
on their
estimated fair market values as of the effective date of the
transaction. At
October 1, 1992, the allocation was based on preliminary
estimates of the fair
value of the net assets. In July, 1993, agreement was reached
with the selling
shareholders of Lynn-Edwards regarding the final purchase price.
The excess of
the purchase price over the estimated fair value of net tangible
assets
acquired of $5,242 is being amortized on a straight-line basis
over 40 years.
On March 23, 1994, Lynn-Edwards was merged into ASI.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include AHI and its
wholly owned
subsidiary, ASI. The consolidated financial statements include
Lynn-Edwards in
the results of operations since its acquisition date. All
significant
intercompany accounts and transactions have been eliminated.
Certain prior-year
amounts have been reclassified to conform to the current-year
presentation.
Cash and Cash Equivalents
Cash equivalents are composed of highly liquid investments with
an original
maturity of three months or less. As a result of the Company's
cash management
system, checks issued but not
24
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
presented to the banks for payment may create negative book cash
balances. Such
negative balances are classified as bank overdrafts.
Inventory
All inventory is purchased in a state ready for resale to
customers and is
considered finished goods. Inventory is stated at the lower of
cost or market.
Cost is determined using the first-in, first-out ("FIFO") method
for all
inventory.
Property, Plant and Equipment
Property and equipment purchased by the Company through the
acquisitions
referred to in Note 1 are stated at fair market value on the date
of
acquisition as prescribed by the purchase method of accounting.
Subsequent
purchases of property and equipment are stated at cost.
Depreciation and amortization are determined by using the
straight-line
method over the estimated useful lives of the fixed assets. The
following
useful lives are used for recording depreciation for financial
reporting
purposes:
<TABLE>
<S> <C>
Buildings.........................
40 years
Machinery and equipment...........
3-15 years
Furniture and fixtures............
3-10 years
Assets held under capital lease... Lesser of useful lives
or term of lease
</TABLE>
Repairs and maintenance are charged to expense as incurred.
Software Capitalization
Significant system development costs determined to have
benefits for future
periods are capitalized at cost. Software costs and software
development costs
of $513, $767 and $780 as of December 31, 1992, 1993 and 1994,
respectively,
were capitalized and subject to amortization. Amortization
expense is
recognized over the periods in which benefits are realized,
generally not to
exceed five years. Amortization expense for the eleven months
ended December
31, 1992 and for the years ended December 31, 1993 and 1994, was
$88, $128 and
$157, respectively. Capitalized software, net of accumulated
amortization, as
of December 31, 1993 and 1994, was $551 and $407, respectively.
Intangibles
Intangible assets, included in other long-term assets on the
accompanying
consolidated balance sheets, consist principally of excess
purchase price over
net tangible assets of businesses acquired ("goodwill"). Goodwill
is amortized
on a straight-line basis over periods not exceeding 40 years. The
Company
continually evaluates whether events or circumstances have
occurred indicating
that the remaining estimated useful life of goodwill may not be
appropriate.
When factors indicate that goodwill should be evaluated for
possible
impairment, the Company uses an estimate of the acquired
business' undiscounted
future operating income compared to the carrying value of
goodwill to determine
if a write-off is necessary. Gross goodwill as of December 31,
1993 and 1994
was $5,242. Accumulated goodwill amortization as of December 31,
1993 and 1994,
was $164 and $295, respectively.
The Company incurred legal and other direct costs in connection
with the
issuance of its outstanding debt. These transaction costs of
$4,217 and $2,945
at December 31, 1993 and 1994, respectively, net of accumulated
amortization,
are included in other long-term assets. Accumulated transaction
cost
amortization as of December 31, 1993 and 1994, was $2,034 and
$3,306,
respectively. These costs are being amortized over the weighted
average term of
the related outstanding debt.
25
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
Income Taxes
Effective January 31, 1992, the Company adopted Statement of
Financial
Accounting Standard No. 109, "Accounting for Income Taxes."
Accordingly, the
Company records a provision for income taxes using the
"liability" method of
accounting for income taxes. Deferred tax assets and liabilities,
less an
appropriate valuation allowance, are recorded for all temporary
differences
between financial and tax reporting and are the result of
differences in the
timing of recognition of certain income and expense items for
financial and tax
accounting purposes. Deferred tax expense (benefit) results from
the net
changes during the year in the deferred tax assets and
liabilities and the
valuation allowance.
3. DEBT:
Long-term debt consists of the following as of December 31,
1993 and 1994:
<TABLE>
<CAPTION>
1993 1994
-
- ------ -------
<S>
<C> <C>
Revolver.................................................
$47,810 $39,910
Term loan--
Tranche A, due in installments until December, 1996....
15,000 11,000
Tranche B, due in installments from January, 1997
until December, 1998..................................
10,000 10,000
Original issue discount -- tranche B.....................
(582) (443)
Capital lease obligation, 8.87% interest rate............
2,540 2,052
Equipment loan, 7.99% interest rate......................
2,000 1,661
-
- ------ -------
76,768 64,180
Less -- Current maturities...............................
(4,828) (5,901)
-
- ------ -------
$71,940 $58,279
======= =======
</TABLE>
In connection with the Acquisition, and as amended in
connection with the
acquisition of Lynn-Edwards, the Company entered into a $95,000
Second Amended
and Restated Credit Agreement ("Credit Agreement"). The Credit
Agreement
consists of a $65,000 revolving credit facility ("Revolver"), a
$20,000 term
loan, Tranche A, and a $10,000 term loan, Tranche B ("Term
Loan"). The proceeds
of the Revolver and the Term Loan were used to fund the
Acquisition, to fund
the purchase of the outstanding capital stock of Lynn-Edwards, to
pay off
certain indebtedness of Lynn-Edwards at the acquisition date and
to pay
expenses related to these two transactions. In addition, proceeds
were used to
finance the working capital requirements of the combined
companies.
The Revolver provides for revolving credit loans up to the
amount of the
commitment based on eligible receivables and inventory, as
defined in the
Credit Agreement. Interest is payable at a rate per annum of 1
3/4% plus the
higher of either the prime rate or 1/2% plus the federal funds
rate, as
defined. The Revolver terminates on January 31, 1997. Prepayments
are required
when cash flow, as defined, exceeds specified levels. The
Revolver interest
rates and outstanding amounts during the year and at the end of
the year are as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED
THROUGH
DECEMBER 31,
DECEMBER 31, --
- --------------
1992
1993 1994
------------ --
- ----- -------
<S> <C>
<C> <C>
Interest rate at end of year............... 7.75%
7.75% 10.25%
Weighted average interest
rate during year.......................... 8.00%
7.75% 8.90%
Average amount outstanding
during year............................... $26,811
$46,864 $39,556
Maximum month-end balance
during year............................... 36,081
58,510 53,810
=======
======= =======
</TABLE>
26
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
Term loan tranche A is payable in 57 monthly installments which
commenced on
April 30, 1992. Interest is payable at a rate per annum of 2%
plus the higher
of either the prime rate or 1/2% plus the federal funds rate, as
defined. The
weighted average interest rate was 8.25%, 8.00% and 9.15% during
the eleven
months ended December 31, 1992 and the years 1993 and 1994,
respectively. The
interest rate was 8.00% and 10.50% at December 31, 1993 and 1994,
respectively.
Term loan tranche B is payable in 24 monthly installments,
commencing on
January 31, 1997. Interest is payable at a rate per annum of 5%
plus the higher
of either the prime rate or 1/2% plus the federal funds rate, as
defined. The
weighted average interest rate was 11.25%, 11.00% and 12.15%
during the eleven
months ended December 31, 1992 and the years 1993 and 1994,
respectively. The
interest rate was 11.00% and 13.50% at December 31, 1993 and
1994,
respectively.
The Credit Agreement contains certain covenants and provisions
which, among
others, include restrictions on dividend payments, required
levels of total
capital, required ratio of current assets to current liabilities
and
restrictions on capital expenditures. Borrowings under the Credit
Agreement are
collateralized by substantially all of the real and personal
property of the
Company.
The Company entered into a capital lease in December, 1992, for
substantially
all of the equipment at the Carol Stream warehouse facility. As
of December 31,
1993 and 1994, assets recorded under this capital lease were
approximately
$3,002 with related accumulated amortization of $425 and $726,
respectively. As
of December 31, 1993 and 1994, total obligations under this
capital lease were
$2,540 and $2,052, respectively, of which $488 and $534 is
recorded as a
current liability, respectively. The lease agreement contains
certain financial
covenants and provisions, including a maximum level of debt to
tangible net
worth, a required level of tangible net worth, and a ratio of
cash flow, as
defined, to the current portion of long-term debt.
In 1993, Lynn-Edwards entered into a $2,000 term loan to
finance the purchase
of capital equipment. The loan agreement contains certain
financial covenants
and provisions, including a maximum level of debt to tangible net
worth, a
required level of tangible net worth and a ratio of cash flow, as
defined, to
current portion of long-term debt. The loan is amortized over 60
equal
installments.
Debt maturities, excluding the original issue discount, for the
five years
following the period ended December 31, 1994, are as follows:
<TABLE>
<S> <C>
1995...................................... $ 5,901
1996...................................... 6,980
1997...................................... 46,276
1998...................................... 5,466
1999...................................... --
-------
$64,623
=======
</TABLE>
Maturities of long-term debt in 1997 include a balance under
the Revolver of
$39,910.
Fair Market Value of Financial Instruments
The carrying value of cash and cash equivalents and short-term
debt
approximates fair value because of the short-term maturity of the
instruments.
Management believes that the fair value of the Revolver and Term
Loan
approximates its carrying value as of December 31, 1993 and 1994,
respectively,
because the interest rate on the debt is a floating rate tied to
the prime
rate.
27
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
4. LEASE OBLIGATIONS:
The Company leases certain facilities under noncancelable
operating leases
expiring through July, 2004, with various renewal options.
The following table shows future minimum annual lease
commitments on
noncancelable operating leases. The table excludes real estate
taxes,
insurance, maintenance and other costs related to the properties
which are paid
by the Company.
<TABLE>
<S>
<C>
1995........................................................... $
2,696
1996...........................................................
2,498
1997...........................................................
1,940
1998...........................................................
1,568
1999...........................................................
1,449
Thereafter.....................................................
3,804
- -------
Total minimum lease
payments................................... $13,955
=======
</TABLE>
Rent expense for operating leases was approximately $1,590 for
the eleven
months ended December 31, 1992, and $2,711 and $2,952 for the
years ended
December 31, 1993 and 1994, respectively.
5. RETIREMENT BENEFITS:
Defined Contribution Plan
The ASI Profit Sharing and Savings Plan ("the Plan") is a
Section 401(k) plan
with a discretionary profit sharing component which commenced on
April 1, 1992.
The Plan and the trust established pursuant to the Plan are
intended to meet
the requirements of the Employee Retirement Income Security Act
of 1974
("ERISA") and qualify under Sections 401(a) and 501(a) of the
Internal Revenue
Code of 1986, as amended. The Plan covers substantially all full-
time employees
of the Company. Pursuant to the Plan, the Company matched
employee
contributions in the amount of $0.50 for each $1.00 contributed
through July,
1993, and $0.25 for each $1.00 contributed subsequently, up to an
employee
contribution maximum of 6.0% of compensation, as defined. The
expense under the
above plan was $256 for the eleven months ended December 31, 1992
and $435 and
$277 for the years ended December 31, 1993 and 1994,
respectively.
Postretirement Benefits
In December, 1990, the Financial Accounting Standards Board
("FASB") issued
Standard No. 106, "Accounting for Postretirement Benefits Other
Than Pensions."
This standard requires that the expected cost of these
postemployment benefits
be charged to expense during the years that the employees render
service. The
Company does not offer postretirement benefits to its employees.
28
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
6. INCOME TAXES:
At January 31, 1992, the date of the Acquisition, the Company
had a net
deferred tax asset primarily due to the higher tax basis
allocated to the net
assets acquired, including intangible assets and certain
reserves. A valuation
allowance was established at the date of the Acquisition for the
entire amount
of the net deferred tax asset.
For the eleven months ended December 31, 1992, and the years
ended December
31, 1993 and 1994, and components of the provision for income
taxes were as
follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEARS ENDED
THROUGH
DECEMBER 31,
DECEMBER 31, -
- --------------
1992
1993 1994
------------ -
- ------ ------
<S> <C>
<C> <C>
Currently payable--
Federal...................................... $ 1,584 $
227 $3,090
State........................................ 193
554 903
------- -
- ------ ------
Total currently payable.................... 1,777
781 3,993
------- -
- ------ ------
Deferred, net--
Federal...................................... 1,107
1,012 166
State........................................ 163
148 24
Valuation allowance reduction................ (1,270)
(1,160) (190)
------- -
- ------ ------
Total deferred, net........................ --
- -- --
------- -
- ------ ------
Provision for income taxes..................... $ 1,777 $
781 $3,993
=======
======= ======
</TABLE>
The components of the deferred income tax provision (benefit)
were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------
- --------------
1992
1993 1994
------- --
- ----- -------
<S> <C>
<C> <C>
Accelerated tax depreciation...................... $ 308 $
(42) $ (266)
Amortization of intangible assets................. 822
897 897
Acquisition accruals.............................. 1,130
415 297
Sales discounts and deferred revenue.............. (119)
(297) (1,014)
Other............................................. (871)
187 276
Valuation allowance reduction..................... (1,270)
(1,160) (190)
------- --
- ----- -------
Provision (benefit) for deferred income taxes..... $ -- $
- -- $ --
=======
======= =======
</TABLE>
29
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
Reconciliations of the statutory federal income tax rates to
the effective
income tax rates were as follows:
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
THROUGH
DECEMBER 31, YEARS ENDED
DECEMBER 31,
--------------- ---------------
- ----------------
1992 1993
1994
--------------- ---------------
- --------------
% OF % OF
% OF
PRETAX PRETAX
PRETAX
AMOUNT INCOME AMOUNT INCOME
AMOUNT INCOME
------- ------ ------- ------
- ------ ------
<S> <C> <C> <C> <C>
<C> <C>
Tax provision based on the
federal statutory rate......... $ 1,607 34.0% $ 1,273 34.0%
$3,535 34.0%
State and local income taxes --
net of federal income tax
benefit........................ 197 4.2 492 13.2
607 5.8
Reserves........................ 1,243 26.3 176 4.7
41 .4
Valuation allowance reduction... (1,270) (26.9) (1,160) (31.0)
(190) (1.8)
------- ----- ------- -----
- ------ ----
Provision for income taxes...... $ 1,777 37.6% $ 781 20.9%
$3,993 38.4%
======= ===== ======= =====
====== ====
</TABLE>
The amounts of deferred tax assets and deferred tax liabilities
at December
31, 1993 and 1994 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
- --------------
1993
1994
-------------------- ------
- --------------
ASSETS LIABILITIES ASSETS
LIABILITIES
------- ----------- ------
- - -----------
<S> <C> <C> <C>
<C>
Depreciation and amortization.... $ -- $ 603 $ --
$390
Intangible assets................ 2,766 --
1,869 --
Allowance for doubtful accounts.. 1,598 --
1,664 --
Inventory reserves and
adjustments..................... 1,433 --
1,264 --
Accrued expenses................. 4,577 608
4,566 --
------- ------ ------
- - ----
10,374 1,211
9,363 390
Valuation allowance.............. (9,163) --
(8,973) --
------- ------ ------
- - ----
Total.......................... $ 1,211 $1,211 $
390 $390
======= ======
======= ====
</TABLE>
7. REDEEMABLE PREFERRED STOCK:
AHI has 245,000 authorized shares of preferred stock
(nonvoting), consisting
of 15,000 shares of $0.01 par value Class A preferred stock,
15,000 shares of
$0.01 par value Class B preferred stock, 15,000 shares of $0.01
par value Class
C preferred stock, and 200,000 shares of $0.01 par value
Additional preferred
stock. All preferred stock issued at the date of inception was
valued at the
amount of cash paid or assets received for the stock at $1,000
per share. As of
December 31, 1993 and 1994, there were 5,000 shares of Class A
preferred stock
issued and outstanding, and 1,138 and 1,788 shares which have
been accrued as
dividends but not issued, respectively. As of December 31, 1993
and 1994, there
were 5,943 and 6,560 shares of Class B preferred stock and 8,915
and 9,841
shares of Class C preferred stock issued and outstanding,
respectively. There
were no shares of Additional preferred stock issued and
outstanding as of
December 31, 1993 or 1994. These shares are senior in preference
to the common
stock of the Company.
Class A preferred stock must be redeemed by the Company on July
31, 1999.
Dividends are cumulative at a rate of 10% per annum, payable
quarterly on April
30, July 31, October 31 and January 31. In the event that the
Company does not
pay dividends in cash, the dividend rate increases to 13%
30
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
per annum and is payable in stock. Class B and C preferred stock
are junior in
relation to the Class A preferred stock. During the eleven months
ended
December 31, 1992, 488 shares of Class A preferred stock were
accrued but not
issued. During each of the years ended December 31, 1993 and
1994, 650 shares
of Class A preferred stock were accrued but not issued.
Class B preferred stock must be redeemed by the Company on July
31, 1999.
Class C preferred stock is redeemable in four equal quarterly
installments on
April 30, 2001, July 31, 2001, October 31, 2001, and January 31,
2002.
Dividends for both Class B and C are cumulative at a rate of 9%
per annum.
Dividends are payable quarterly on April 30, July 31, October 31
and January
31. In the event that the Company does not pay dividends in cash,
the dividend
rate increases to 10% per annum and is payable in stock. During
the eleven
months ended December 31, 1992, noncash dividends were declared
and issued for
both Class B and C preferred stock in the amount of 384 and 577
shares,
respectively. During the year ended December 31, 1993, noncash
dividends were
declared and issued for both Class B and C preferred stock in the
amount of 559
and 838 shares, respectively. During the year ended December 31,
1994, noncash
dividends were declared and issued for both Class B and C
preferred stock in
the amount of 617 and 926 shares, respectively.
Redemption of preferred stock, for the five years following the
period ended
December 31, 1994, are as follows:
<TABLE>
<S> <C>
1995............................. --
1996............................. --
1997............................. --
1998............................. --
1999............................. $13,348
</TABLE>
All classes of preferred stock may be redeemed at the option of
the issuer at
any time. All classes of preferred stock have a redemption and
liquidation
value of $1,000 per share plus the aggregate of accrued and
unpaid dividends on
such shares to date.
8. STOCKHOLDERS' EQUITY:
Common Stock and Warrants
AHI has 10,000,000 authorized shares of common stock,
consisting of 5,000,000
shares of $0.01 par value Class A voting common stock and
5,000,000 shares of
$0.01 par value Class B nonvoting common stock. Each holder of
Class A common
stock is entitled to one vote for each share of common stock held
of record by
such holder. No dividends on common shares were accrued or paid
for the eleven
months ended December 31, 1992, or for the years ended December
31, 1993 and
1994. All common stock issued at the date of inception was valued
at the amount
of cash paid for the stock or, in the case of services rendered
or to be
rendered, at $10.00 per share.
As of December 31, 1993 and 1994, the Company has 23,129
warrants outstanding
which allow the holders to buy shares of AHI common stock at an
exercise price
of $1 per share. At the date of inception, these warrants were
valued at $10.00
per warrant. In addition, 2,506 warrants have been accrued but
not issued, as
of December 31, 1994. These warrants were valued at $11.43 per
warrant. The
exercise period expires January 31, 2002.
The Company has 190,218 warrants ("Lender Warrants")
outstanding as of December 31, 1993 and 1994, which allow the
holders thereof to buy shares of Associated Holdings, Inc. common
stock at an exercise price of $0.01 per share. Of the Lender
Warrants, 150,340 were valued at the date of inception at the
negotiated amount of $6.65 per warrant while the remaining 39,878
warrants were valued at $10.92 per warrant. In addition, 18,821
additional Lender Warrants have been accrued but not issued, as
of December 31, 1994. The exercise period expires January 31,
2002. These warrants were valued at $11.43 per warrant.
The Company has 190,218 warrants ("Lender Warrants")
outstanding as of
December 31, 1993 and 1994, which allow the holders thereof to
buy shares of
Associated Holdings, Inc. ("AHI") common stock at an exercise
price of
$0.01 per share. Of the Lender Warrants, 150,340 were valued at
the
date of inception at the negotiated amount of $6.65 per warrant
while
the remaining 39,878 warrants were valued at $10.92 per warrant.
In
addition, 18,821 additional Lender Warrants have been accrued
but not issued, as of December 31, 1994. The exercise period
expires January
31, 2002. These warrants were valued at $11.43 per warrant.
31
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
The Lender Warrants contain certain put rights which allow the
holders
thereof to put the Warrants to AHI upon the earlier of January
31, 1997 or the
occurrence of certain extraordinary corporate events. The
purchase price
payable upon the exercise of the put rights is the greater of the
then fair
market value or equity value of the warrants, as defined, less
the applicable
exercise price of the warrants. Payment of the Lender Warrants
can only occur
after repayment of all debt outstanding under the Credit
Agreement or with the
consent of the lenders and/or agent under the Credit Agreement.
Earnings Per Share
The Company presents earnings per share on both a primary and
fully diluted
basis. Earnings per common and dilutive common equivalent share
amounts were
computed by dividing net income, after deducting dividends on
preferred stock,
by the weighted average number of common and dilutive common
equivalent shares
outstanding during the period. The weighted average number of
shares includes
the dilutive effect of warrants computed using the treasury stock
method, as
well as the common shares that would result from the conversion
of the deferred
obligation related to the TS Agreement.
Earnings per common share assuming full dilution amounts were
computed by
dividing net income, after deducting dividends on preferred
stock, by the
weighted average number of fully diluted common shares
outstanding during the
period. The weighted average number of shares includes the
dilutive effect of
warrants computed using the treasury stock method, as well as the
common shares
that would result from the conversion of the deferred obligation
related to the
TS Agreement.
For the eleven months ended December 31, 1992, and the year
ended December
31, 1993 employee stock options (discussed in Note 9) were not
included in
either the weighted average number of common and dilutive common
equivalent
shares or the weighted average shares on a fully diluted basis,
as they would
have an anti-dilutive result. For the year ended December 31,
1994, the stock
options of one employee were included in the weighted average
share
computations, as they had a dilutive result. The remainder of the
employee
stock options were not included in the weighted average share
computations for
the year ended December 31, 1994, as they would have an anti-
dilutive effect.
The net income, preferred stock dividends and shares used to
compute primary
and fully diluted earnings per share are presented in the
following table.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
YEAR ENDED
THROUGH
DECEMBER 31,
DECEMBER 31,
- -------------
1992
1993 1994
------------
- ------ ------
<S> <C>
<C> <C>
PRIMARY
Net Income........................................ $2,950
$2,962 $6,403
Preferred stock dividends issued and accrued...... 1,449
2,047 2,193
------
- ------ ------
Net income attributable to common stockholders'
equity........................................... $1,501
$ 915 $4,210
======
====== ======
Average number of common and dilutive common
equivalent shares................................ 1,139
1,171 1,199
FULLY DILUTED
Net income........................................ $2,950
$2,962 $6,403
Preferred stock dividends issued and accrued...... 1,449
2,047 2,193
------
- ------ ------
Net income attributable to common stockholders'
equity........................................... $1,501
$ 915 $4,210
======
====== ======
Average number of shares, assuming full dilution.. 1,139
1,171 1,205
</TABLE>
32
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONTINUED)
9. EMPLOYEE STOCK OPTION AND AWARD PLANS:
On January 31, 1992, the stockholders of AHI approved the
adoption of the AHI
1992 Management Stock Option Plan (the "Plan"). The purpose of
the Plan is to
promote the interests of the Company and its shareholders by
providing the
officers and other key employees with additional incentive and
the opportunity
through stock ownership to increase their proprietary interest in
the Company
and their personal interest in its continued success. As of
December 31, 1994,
86,735 shares of common stock have been authorized for grant
under the Plan.
Under the terms of the Plan, the option price at the time any
option is
granted will not be less than the fair market value per share.
The shares
granted to date have an exercise price of $10 per share and vest
at a rate of
25% annually, subject to certain internal rate of return hurdles.
As of
December 31, 1994, six persons held such options. No options were
exercisable
as of December 31, 1994. Changes in stock options outstanding
were as follows:
<TABLE>
<CAPTION>
SHARES
- -------
<S>
<C>
Granted as of the date of
Inception.............................. 21,684
Granted........................................................
31,585
Exercised......................................................
- --
Expired or
terminated.......................................... --
- -------
Granted as of December 31,
1992.................................. 53,269
Granted........................................................
- --
Exercised......................................................
- --
Expired or
terminated.......................................... --
- -------
Granted as of December 31,
1993.................................. 53,269
Granted........................................................
4,163
Exercised......................................................
- --
Expired or
terminated.......................................... (25,904)
- -------
Granted as of December 31,
1994.................................. 31,528
=======
</TABLE>
10. SUPPLEMENTAL CASH FLOW DISCLOSURES:
In addition to the information provided in the statement of
cash flows, the
following are supplemental disclosures of cash flow information
for the eleven
months ended December 31, 1992 and the twelve months ended
December 31, 1993
and 1994;
<TABLE>
<CAPTION>
1992
1993 1994
------
- ------ ------
<S> <C>
<C> <C>
Cash paid during the year for--
Interest.......................................... $4,694
$6,119 $6,588
Income taxes...................................... 135
630 2,118
======
====== ======
</TABLE>
The following are supplemental disclosures of noncash investing
and financing
activities for the eleven months ended December 31, 1992 and the
twelve months
ended December 31, 1993 and 1994;
. In 1992, the Company issued common stock warrants, valued at
$435, in
connection with the acquisition of Lynn-Edwards.
. On January 31, 1992, the Company issued common stock warrants
valued at
$1,231 for services rendered in connection with the
Acquisition.
. On January 31, 1992, the Company issued common stock valued
at $462 for
services to be rendered to ASI through 2002.
33
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONCLUDED)
. On January 31, 1992, the Company issued common stock valued
at $315 for
services rendered in connection with the Acquisition.
. On January 31, 1992, the Company issued Class A preferred
stock valued at
$185 for services rendered in connection with the
Acquisition.
. On January 31, 1992, the Company issued Class B preferred
stock valued at
$5,000 as partial payment for the Acquisition.
. In 1994, the Company issued $9,000 of common stock to retire
a $9,000
deferred obligation related to a Transition Services
Agreement ("TS
Agreement").
. In 1994, the Company accrued $63 for common stock shares to
be issued at
less than fair market value.
. In 1994, the Company accrued $244 for warrants which have an
exercise
price less than the fair market value of the common stock.
11. TRANSACTIONS WITH RELATED PARTIES:
The Company has management and advisory services agreements
with three
investor groups which own the majority of Associated's Class A
Common and Class A
preferred stock. These investor groups provided certain financial
advisory
services to the Company in connection with the Acquisition, in
exchange for an
aggregate of $1.0 million: 31,480 shares of Associated class A
common stock
with a recorded value of $315,000; and 185 shares of class A
preferred stock
with a recorded value of $185,000.
In addition, these same investor groups provide certain
oversight and
monitoring services to the Company, in exchange for management
fees and out-of-
pocket expenses. The expense related to the above agreements was
$475 and $90
of out-of-pocket expenses for the eleven months ended December
31, 1992, $283
and $47 of out-of-pocket expenses for the year ended December 31,
1993 and $500
and $68 of out-of-pocket expenses for the year ended December 31,
1994.
Pursuant to the Credit Agreement, the aggregate payments under
these agreements
cannot exceed $500 per year plus reasonable out-of-pocket
expenses.
In addition, on January 31, 1992, two of these same investor
groups received
an aggregate of 46,258 shares of AHI common stock (shares can be
rescinded if
the agreement is terminated prior to January 31, 2002) as
deferred compensation
for future services. The deferred compensation related to these
shares had a recorded value of $463,000 at January 31, 1992 and
were fully amortized during the 11-month period ended December
31, 1992.
On January 31, 1992, the Company entered into the TS Agreement
with the
holder of the Class B preferred stock (nonvoting). The TS
Agreement stipulated
that the Company receive certain services for between two months
and two years
from January 31, 1992. The services included dual facility
services (including
inventory purchases), information systems services and freight
consolidation
services. In return, the Company made monthly payments, as
defined. Under this
agreement, the Company purchased services of $21,000 (including
inventory
purchases of $13,175) during the eleven months ended December 31,
1992 and
$1,980 and $825 during the twelve months ended December 31, 1993
and 1994,
respectively. The TS Agreement also allowed for deferment of up
to $9,000 in
payments. During the eleven months ended December 31, 1992, the
Company
deferred $9,000 in payments. This deferred obligation is recorded
in deferred
obligations and other long-term liabilities on the balance sheet
at December
31, 1993.
During 1994, per the TS Agreement, the Company settled the
obligation by
issuing 58,653 shares of AHI Class A common stock to the holder
of the Class B
preferred stock.
34
<PAGE>
ASSOCIATED HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --
(CONCLUDED)
The holder of the Class B preferred stock is also a supplier to
the Company.
The total inventory purchases from this supplier were $17,963
during the eleven
months ended December 31, 1992 and $21,903 and $26,728 during the
twelve months
ended December 31, 1993 and 1994, respectively. As of December
31, 1993 and
1994, $1,413 and $2,293 were due to this supplier and recorded in
trade
accounts payable.
The holder of the Class B preferred stock is also a customer of
the Company.
Net sales to this customer were $11,860 during the eleven months
ended December
31, 1992 and $19,153 and $33,447 during the twelve months ended
December 31,
1993 and 1994, respectively. Accounts receivable from this
customer were $145
and $299 as of December 31, 1993 and 1994, respectively.
On January 31, 1992, the Company entered into a data processing
facilities
management agreement with the holder of the Class C preferred
stock
(nonvoting). The agreement expires in July 2002, and has minimum
monthly
payments which began in August 1992, ranging from $522 to $689.
Payments
pursuant to the above agreement were $3,023 for the eleven months
ended
December 31, 1992 and $10,336 and $10,630 for the twelve months
ended December
31, 1993 and 1994, respectively. The Company had prepaid $956 and
$1,934 as of
December 31, 1993 and 1994, respectively, for future services. In
addition,
$1,755 and $1,931 was accrued as of December 31, 1993 and 1994,
respectively,
for services provided which had not yet been billed. At December
31, 1994, the
remaining aggregate minimum monthly payments over the term of the
agreement
were $50,078.
Per the agreement, in the event the agreement is terminated for
cause by the
holder of the Class C preferred stock prior to expiration, the
Company agrees
to pay 80% of the remaining minimum monthly charges. In the event
the agreement
is terminated by the Company, the Company agrees to pay the
lesser of $11,000
or 80% of the remaining minimum monthly charges, as well as the
redemption or
purchase of the Class C preferred stock as discussed in Note 7.
12. CONCENTRATION OF CREDIT RISK:
The Company's principal customers are in the retail office
supply industry.
Their financial position has been considered in determining the
Company's
allowance for doubtful accounts.
13. SUBSEQUENT EVENT:
On February 13, 1995, AHI and United Stationers Inc. ("USI")
entered into a
Merger Agreement. Under the terms of the Merger Agreement, the
current
shareholders of USI would receive $15.50 per share for 92.5% of
their shares
and the remaining 7.5% of their shares would represent (in
aggregate) 20% of
the common stock of the combined entity, which will continue to
be publicly
traded.
In connection with the possible merger, ASI paid commitment
fees to a lender
subsequent to December 31, 1994.
35
<PAGE>
(b) PRO FORMA COMBINED FINANCIAL INFORMATION
The accompanying unaudited Pro Forma Combined Financial
Statements are based
on the historical financial statements of Associated and the
Company after
giving effect to the purchase accounting and other merger related
adjustments
relating to the Acquisition and assuming issuance and sale by
USSC of
$150,000,000 in senior subordinated notes (the "Assumed Sub-Debt
Offering") and
the application of the net proceeds therefrom to repay in full
the Bridge Loan
incurred in connection with the Acquisition and, assuming
necessary consents are
obtained, to redeem all of the outstanding shares of Series B
Preferred Stock of
the Company and to reduce outstanding amounts borrowed under the
New Credit
Facilities to the extent of the remaining net proceeds, all as
described in
Notes to Pro Forma Combined Financial Information. The Pro Forma
Combined
Balance Sheet is presented giving effect to the Acquisition and
the Assumed Sub-
Debt Offering and the refinancing of certain debt and redemption
of certain
preferred stock to be effected with the proceeds thereof, as
described above, as
if all such transactions had been consummated on December 31,
1994. The Pro
Forma Combined Income Statement for the year ended December 31,
1994 is
presented giving effect to (i) the Acquisition as if it had been
consummated on
January 1, 1994 and (ii) the refinancing of certain debt and
redemption of
certain preferred stock to be effected with the proceeds of the
Assumed Sub-Debt
Offering, as described above, as if such refinancing and
redemption had been
consummated one month after consummation of 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. Accordingly, the Pro
Forma Combined
Balance Sheet combines Associated as of December 31, 1994 with
the Company as of
November 30, 1994 (the date of its fiscal quarter ending nearest
to December 31,
1994) and the Pro Forma Combined Income Statement combines
Associated for its
fiscal year ended December 31, 1994 with the Company for its
twelve month period
ended November 30, 1994. The Company's historical statement of
income previously
reported on a fiscal year ended August 31, 1994 has been adjusted
to reflect the
twelve month period ended November 30, 1994.
The unaudited Pro Forma Combined Financial Statements are
intended for
informational purposes only and are not necessarily indicative of
the future
financial position or future results of operations of the Company
after the
Acquisition, or of the financial position or results of
operations of the
Company that would have actually occurred had the Acquisition
occurred on the
date or been in effect for the period presented.
Pro forma interest expense included in the Pro Forma Combined
Income Statement
is based on historical interest rates in effect during the year
ended December
31, 1994 in calculating the basis for variable rates. Average 30-
day LIBOR in
effect for the year ended December 31, 1994 ranged from 3.15% to
6.09%. The
average prime rate during the three months ended March 31, 1994
was 6.02%. In
comparison, at March 29, 1995, LIBOR was 6.125% and the prime
rate was 9.0%. If
the March 29, 1995 interest rates were used as base interest
rates instead of
the historical rates, pro forma interest expense for the Company
would amount to
$55.1 million instead of $47.8 million. Each 1/8 of 1% change in
the base
interest rate for variable rate debt has a $521 thousand effect
on annual pro
forma interest expense for the Company.
The Pro Forma Combined Income Statement excludes (i) the
extraordinary non-
recurring write-off of approximately $2.2 million ($1.3 million
net of tax
benefit of $0.9 million) of financing costs and original issue
discount
relating to debt which will be retired and (ii) a non-recurring
charge for
restructuring of approximately $9.8 million ($5.9 million net of
tax benefit of
$3.9 million) for costs expected to be incurred in connection
with integration
and transition (e.g., severance and the cost of closing certain
facilities
operated by Associated prior to the Merger). Pro forma net income
available to
common stockholders and net income per common and common
equivalent share
exclude the charge to retained earnings to adjust Redeemable
Warrants to the
put value, due to the non-recurring nature of this charge.
Approximately $14.6
million of additional integration and transition costs (e.g.,
severance and the
cost of closing facilities operated by the Company prior to the
Merger) will be
recorded as additional costs of the Merger, in accordance with
the purchase
method of accounting. The above-referenced restructuring reserve
and the
purchase accounting reserve relating to the integration and
transition expenses
total $24.4 million and are included in the Pro Forma Combined
Balance Sheet as
a component of accrued and other current liabilities.
The unaudited Pro Forma Combined Financial Statements and the
accompanying
notes should be read in conjunction with, and are qualified in
their entirety
by, the historical consolidated financial statements of the
Company and
Associated, including the related notes thereto, filed herewith.
36
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS
INC.
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ASSOCIATED UNITED
HOLDINGS, INC. STATIONERS INC.
AT DECEMBER 31, AT NOVEMBER 30, PRO
FORMA PRO FORMA
1994 1994
ADJUSTMENTS COMBINED
--------------- --------------- --------
- --- ----------
<S> <C> <C> <C>
<C>
ASSETS
Current assets:
Cash and cash
equivalents.......... $ 1,849 $ 5,142 $ -
- - $ 6,991
Accounts receivable... 45,139 203,316 -
- - 248,455
Inventories........... 88,197 271,857
19,600 (a) 379,654
Other current assets.. 3,795 15,153
5,980 (b) 24,928
-------- -------- -------
- -- ----------
Total current
assets............. 138,980 495,468
25,580 660,028
Property, plant and
equipment.............. 45,447 126,919
51,086 (a) 223,452
Goodwill................ 4,948 42,091
28,985 (c) 76,024
Other assets............ 3,104 10,399
30,458 (d) 43,961
-------- -------- -------
- -- ----------
TOTAL ASSETS............ $192,479 $674,877 $
136,109 $1,003,465
======== ========
========= ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...... $ 54,351 $120,425 $ -
- - $ 174,776
Accrued and other
current liabilities.. 22,274 87,720
34,119 (e) 144,113
Short-term debt and
current maturities of
long-term debt....... 5,901 36,301
(25,206)(f) 16,996
-------- -------- -------
- -- ----------
Total current
liabilities........ 82,526 244,446
8,913 335,885
Deferred income taxes... -- 17,142
13,857 (b) 30,999
Other liabilities....... 2,060 5,870
10,557 (g) 18,487
Total long-term debt.... 58,279 156,345
329,672 (f) 544,296
Total redeemable
preferred stock........ 23,189 --
(6,560)(h) 16,629
Redeemable warrants..... -- --
10,484 (i) 10,484
Stockholders' equity:
Common stock.......... 10 1,860
(1,269)(j) 601
Additional paid in
capital.............. 17,879 91,894
(54,543)(j) 55,230
Warrants.............. 1,910 --
(1,651)(i) 259
Retained earnings..... 6,626 157,463
(173,494)(k) (9,405)
Treasury stock........ -- (143)
143 (l) --
-------- -------- -------
- -- ----------
Total stockholders'
equity............. 26,425 251,074
(230,814) 46,685
-------- -------- -------
- -- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY... $192,479 $674,877 $
136,109 $1,003,465
======== ========
========= ==========
</TABLE>
See accompanying notes to Pro Forma Combined Financial
Information.
37
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS
INC.
PRO FORMA COMBINED INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
<TABLE>
<CAPTION>
ASSOCIATED UNITED
HOLDINGS, INC. STATIONERS INC.
FOR THE YEAR FOR THE TWELVE
ENDED MONTHS ENDED
DECEMBER 31, NOVEMBER 30, PRO
FORMA PRO FORMA
1994 1994
ADJUSTMENTS COMBINED
-------------- --------------- --------
- --- ----------
<S> <C> <C> <C>
<C>
Net sales............... $ 477,445 $1,504,625 $ --
$1,982,070
Cost of sales........... 357,276 1,181,541
(3,208)(m) 1,535,609
--------- ---------- ------
- - ----------
Gross profit............ 120,169 323,084
3,208 446,461
Warehouse, distribution,
selling, general and
administrative
expenses............... 103,020 284,484
(16,987)(n) 370,517
--------- ---------- ------
- - ----------
Income from operations.. 17,149 38,600
20,195 75,944
Interest expense, net... (6,753) (11,155)
(29,883)(o) (47,791)
Other income, net....... -- 86 --
86
--------- ---------- ------
- - ----------
Income before income
taxes.................. 10,396 27,531
(9,688) 28,239
Income taxes............ 3,993 10,763
(3,875)(p) 10,881
--------- ---------- ------
- - ----------
Net income.............. 6,403 16,768
(5,813) 17,358
Preferred Stock
dividends issued and
accrued................ 2,193 --
(566)(q) 1,627
--------- ---------- ------
- - ----------
Net income available to
common Stockholders.... $ 4,210 $ 16,768
$(5,247) $ 15,731
========= ==========
======= ==========
Net income per common
and common equivalent
share:
Primary............... $ 3.51 $ 0.90
$ 2.30
========= ==========
==========
Fully diluted......... $ 3.49 $ 0.90
$ 2.30
========= ==========
==========
Weighted average common
and common equivalent
shares:
Primary............... 1,199,000 18,589,209
6,844,597
========= ==========
==========
Fully diluted......... 1,205,000 18,589,209
6,844,597
========= ==========
==========
OPERATING AND OTHER
DATA:
EBITDA*............... $ 23,505 $ 60,100
$25,966 $ 109,571
EBITDA margin**....... 4.9% 4.0% --
5.5%
Depreciation and
amortization......... $ 6,356 $ 21,414 $
5,771 $ 33,541
Capital expenditures,
net.................. 554 9,955 --
10,509
Ratio of EBITDA to
interest expense..... 3.5x 5.3x --
2.3x
Ratio of earnings to
fixed charges***...... 2.4x 3.0x --
1.5x
</TABLE>
- --------
* EBITDA is defined as earnings before interest, taxes,
depreciation and
amortization and is presented because it is commonly used by
certain
investors and analysts to analyze and compare companies on
the basis of
operating performance and to determine a company's ability to
service and
incur debt. EBITDA should not be considered in isolation from
or as a
substitute for net income, cash flows from operating
activities or other
consolidated income or cash flow statement data prepared in
accordance with
generally accepted accounting principles or as a measure of
profitability
or liquidity.
** EBITDA margin represents EBITDA as a percentage of net sales.
*** For purposes of calculating the ratio of earnings to fixed
charges,
earnings represent income before income taxes plus fixed
charges. Fixed
charges consist of interest expense, net of interest income,
including
amortization of discount and financing costs and one-third of
the operating
rental expense which Management believes is representative of
the interest
component of rent expense.
See accompanying notes to Pro Forma Combined Financial
Information
38
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The Pro Forma Combined Financial Statements have been prepared
giving
effect to the following:
(1) Associated acquired 92.5% of the Company's outstanding
Shares for $15.50
per Share, or an aggregate of approximately $266.6 million.
(2) Outstanding options to purchase the Company's Shares were
retired for
$15.50 per share less the exercise price, or an aggregate
of approximately
$3.0 million.
(3) Certain pre-Merger stockholders of Associated purchased
340,158 new
shares of Associated Common Stock for $12.0 million prior
to the
Merger.
(4) As a result of the Acquisition, stockholders of the Company
whose Shares
were not acquired in the Offer hold a 20.0% ownership
interest in the
Company after the Merger on a fully diluted basis. Chase
Manhattan
Investment Holdings, Inc. ("CMIHI") received a 2.0%
ownership interest in
the Company on a fully diluted basis. The Pro Forma
Combined Financial
Information assumes that CMIHI will be entitled to receive
an additional
2.0% ownership interest on a fully diluted basis upon
consummation of the
Assumed Sub-Debt Offering. The remaining 76.0% of Shares of
United on a
fully diluted basis were allocated pro rata to pre-Merger
holders of
Associated Common Stock and warrants or options exercisable
for Associated
Common Stock. Shares of Associated Common Stock were
converted into Shares
of the Company in the Merger.
(5) The total purchase price for the Company, including the
ownership interest
held by the pre-Merger stockholders of the Company not
acquired in the
Offer, based on the per share price of $15.50, plus
transaction costs of
$6.2 million was approximately $294.5 million. The purchase
price has been
preliminarily allocated to the net assets of the Company
based on
estimated fair values at the date of acquisition with the
excess of cost
over fair value allocated to goodwill. The purchase price
allocation to
property, plant and equipment is amortized over the
estimated useful lives
ranging from 3 to 40 years. Goodwill is amortized over 40
years.
The total purchase price of the Company by Associated and
its allocation
to assets and liabilities acquired on a preliminary basis
is as follows:
<TABLE>
<S>
<C>
Purchase price:
Price of Shares purchased by
Associated....................... $ 266,629
Fair value of Shares not acquired in
Offer.................... 21,618
Transaction costs
............................................ 6,225
- ---------
Total purchase
price........................................ $ 294,472
=========
Allocation of purchase price on a preliminary basis:
Current
assets................................................ $ 512,002
Property, plant and
equipment................................. 178,005
Goodwill......................................................
71,076
Other
assets..................................................
9,253
Liabilities
assumed........................................... (475,864)
- ---------
Total purchase
price........................................ $ 294,472
=========
</TABLE>
(6) The accrual by the Company on a pre-Merger basis of
severance payments to
be made to the Company's management personnel under
existing employment
contracts is assumed to have totaled $17.9 million. The non-
recurring
charge to net income recorded by the Company on a pre-
Merger basis (i.e.,
in the period immediately preceding the period covered by
the Pro Forma
Combined Income Statement) for severance payments, the
retirement of
outstanding options to purchase Shares of the Company,
transaction related
costs incurred by the Company, fees for letters of credit
related to
severance payments, and prepayment penalties related to
certain debt of
the Company is assumed to have totaled $17.1 million, net
of the tax
benefit.
39
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION --
(CONTINUED)
(UNAUDITED)
(7) The net proceeds from the Assumed Sub-Debt Offering are
assumed to be used
to refinance the Subordinated Bridge Facility in full and,
on the
assumption that necessary consents are obtained, to redeem
all outstanding
shares of Series B Preferred Stock and to reduce
outstanding amounts under
the New Credit Facilities to the extent of remaining net
proceeds.
(8) Pro forma interest expense has been calculated based upon
pro forma debt
levels and the applicable interest rates. The Subordinated
Bridge
Facility, which carries a variable interest rate based on
the prime rate,
is assumed to be outstanding for one month after the
consummation of the
Merger. Pro forma interest expense on the Subordinated
Bridge Facility was
calculated using an average prime rate of 6.0%. One month
after the
closing date, the Subordinated Bridge Facility is assumed
to have been
refinanced with a portion of the proceeds from the Assumed
Sub-Debt
Offering carrying an assumed fixed interest rate of 12.0%.
For the Term
Loan Facilities and the Revolving Credit Facility, pro
forma interest
expense was calculated on a monthly basis using as a base
interest rate
the average historical 30-day LIBOR in effect for the
month. Average
monthly LIBOR in effect for the year ended December 31,
1994 ranged from
3.15% to 6.09%. Using 30-day LIBOR and the prime rate each
as of March 29,
1995 (6.125% and 9.0%, respectively) as the base interest
rates would
increase pro forma interest expense by $7.3 million. Each
1/8 of 1% change
in the base interest rate for variable rate debt has a $521
thousand
effect on annual pro forma interest expense.
(9) Estimated cost savings of $26 million that USSC expects to
realize
from the actions that Management has committed to undertake
pursuant
to its consolidation plan that has been approved by the
Board of
Directors of USSC have been reflected in the Pro Forma
Combined
Income Statement as if the USSC consolidation plan had been
implemented in full as of January 1, 1994. USSC plans to
implement
its consolidation plan over a 12-month period following the
Acquisition. See footnotes (m) and (n) below.
(10) Income taxes have been provided for all adjustments at an
assumed rate
of 40.0%.
(11) In computing per share information, dividends on preferred
stock are
assumed to have been paid in preferred shares at the rate
of 13.0% per
annum for Series A Preferred Stock and 10.0% per annum for
Series B
and Series C Preferred Stock. Series B Preferred Stock is
assumed to
have been outstanding for only one month. The preferred
stock
dividends reduce the net income available to common
stockholders by
$1.6 million.
40
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS
INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION --
(CONTINUED)
(UNAUDITED)
Pro forma adjustments reflect estimates which will be refined
as additional
information is obtained, particularly in the areas of fair value
of plant,
property and equipment and related depreciation, liabilities for
facilities to
be closed and other transitional matters.
Pro forma adjustments have been made to the Pro Forma Combined
Balance Sheet
to reflect the following (in thousands):
(a) Adjusts inventory and plant, property and equipment to
fair value.
(b) Records deferred taxes relating to the pro forma
adjustments.
(c) Eliminates the Company's historical goodwill and records
goodwill
originating from Associated's acquisition of the Company.
<TABLE>
<S>
<C>
The Company's historical
goodwill............................... $(42,091)
Goodwill originating from Associated's acquisition of
the
Company....................................................
71,076
- --------
$ 28,985
========
</TABLE>
(d) Reflects (i) adjustment of prepaid pension cost to the
amount by
which plan assets exceed the projected benefits obligations for
the Company's
pension plans, (ii) write-off (extraordinary) of financing
costs for
Associated's pre-Acquisition debt which was retired, and (iii)
financing
costs related to Associated's acquisition of the Company and
the Assumed
Sub-Debt Offering.
<TABLE>
<S>
<C>
Adjustment to prepaid pension
cost.............................. $(1,146)
Write-off (extraordinary) of unamortized financing
costs........ (1,795)
Financing costs relating to the acquisition of the
Company...... 33,399
- -------
$30,458
=======
</TABLE>
(e) Reflects (i) current portion of severance payments to be
made to the
Company's management personnel under existing employment
contracts, (ii) bank
fees for letters of credit relating to the aforementioned
severance payments,
(iii) cost of closing certain facilities and termination
benefits for certain
employees, (iv) prepayment penalty (extraordinary) on debt of
the Company that
was retired, and (v) adjustment to income taxes payable for the
write-off of
financing costs and original issue discount.
<TABLE>
<S>
<C>
Severance payments (current
portion)............................. $ 9,549
Bank
fees........................................................
561
Closing of facilities and termination
benefits................... 24,438
Prepayment penalty
(extraordinary)............................... 481
Income taxes
payable............................................. (910)
- -------
$34,119
=======
</TABLE>
(f) Reflects retirement of historical debt and issuance of
new debt in
connection with the Acquisition and the Assumed Sub-Debt
Offering.
<TABLE>
<S>
<C>
Associated's current debt
retired............................. $ (5,000)
United's current debt
retired................................. (36,206)
New debt issued at date of Acquisition (current
portion)...... 16,000
- ---------
Adjustment to current maturities of long-term
debt.......... $ (25,206)
=========
Associated's long-term debt
retired........................... $ (55,910)
The Company's long-term debt
retired.......................... (124,066)
New debt issued at date of Acquisition (less current
portion). 498,145
Write-off (extraordinary) of original issue discount
relating
to retired
debt.............................................. 443
Debt retired with proceeds from Assumed Sub-Debt
Offering..... (138,940)
Notes offered in the Assumed Sub-Debt
Offering................ 150,000
- ---------
Adjustments to long-term
debt............................... $ 329,672
=========
</TABLE>
41
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS
INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION --
(CONTINUED)
(UNAUDITED)
(g) Reflects (i) the non-current portion of severance
payments to be made
to the Company's management personnel under existing employment
contracts,
(ii) the projected benefits obligation relating to the
Company's Supplemental
Benefits Plan, and (iii) the accumulated postretirement benefit
obligation of
the Company.
<TABLE>
<S>
<C>
Severance payments (non-current
portion)......................... $ 8,326
Projected benefits
obligation.................................... 410
Accumulated postretirement benefit
obligation.................... 1,821
- -------
$10,557
=======
</TABLE>
(h) Reflects (i) exchange of Associated's redeemable
preferred stock for
redeemable preferred stock of the Company and (ii) redemption
of Series B
redeemable preferred stock of the Company (assuming necessary
consents are
obtained).
<TABLE>
<S>
<C>
Associated's redeemable preferred
stock........................ $(23,189)
Issuance of redeemable preferred stock of the
Company.......... 23,189
Retirement of Series B redeemable preferred
stock.............. (6,560)
- --------
$ (6,560)
========
</TABLE>
(i) Reclassification of certain warrants ("Redeemable
Warrants") and
adjustment to record Redeemable Warrants at the put value as
the Acquisition
constitutes a specified extraordinary corporate event allowing
the holders
thereof to put the warrants to the Company. The holders of the
Redeemable
Warrants, however, have agreed not to put the warrants before
February 1996.
Pursuant to the terms of the Warrant Agreement under which the
Redeemable
Warrants were issued, as amended, the Company is not obligated
to honor such a
put if a default would result under the New Credit Agreement.
The New Credit
Agreement prohibits any repurchase of the Redeemable Warrants
by the Company
without the consent of the Senior Lenders. The accretion of the
Redeemable
Warrants from book value to put value was charged to retained
earnings in the
period the Acquisition was consummated and has been reflected
in the Pro Forma
Combined Balance Sheet (see note (k)). The charge to retained
earnings,
however, has not been reflected in the Pro Forma Combined
Income Statement for
purposes of arriving at net income available to common
stockholders because of
the non-recurring nature of the charge.
(j) Reflects (i) purchase of additional shares of Associated
Common
Stock, (ii) exchange of Associated Common Stock for Shares,
(iii)
adjustment for Shares not acquired in the Offer, and (iv)
adjustment to
additional paid in capital.
<TABLE>
<S>
<C>
Purchase of Associated Common
Stock............................ $ 3
Elimination of Associated Common
Stock......................... (13)
Elimination of Company Common
Stock............................ (1,860)
Common stock of the Company (Shares purchased by
Associated)... 434
Common stock of the Company (Shares issued to
CMIHI)........... 28
Common stock of the Company (representing Shares not
acquired in
Offer)........................................................
139
- --------
Adjustment to common
stock................................... $ (1,269)
========
Purchase of Associated Common
Stock............................ $ 11,997
Elimination of the Company's additional paid in
capital........ (91,894)
Additional paid in capital (adjustment for par value of
Shares
purchased by
Associated)...................................... (421)
Additional paid in capital (Shares issued to
CMIHI)............ 4,296
Additional paid in capital (representing Shares not
acquired in
Offer)........................................................
21,479
- --------
Adjustment to additional paid in
capital..................... $(54,543)
========
</TABLE>
42
<PAGE>
ASSOCIATED HOLDINGS, INC. AND UNITED STATIONERS
INC.
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION --
(CONCLUDED)
(UNAUDITED)
(k) Reflects (i) elimination of the Company's retained
earnings; (ii)
expense (net of tax) relating to the write-off of
financing costs and
original issue discount for Associated's debt which was
retired, (iii)
estimated expense (net of tax) relating to the
restructuring reserve,
and (iv) accretion related to Redeemable Warrants (see
note(i)).
<TABLE>
<S>
<C>
Elimination of the Company's retained
earnings................ $(157,463)
Write-off (extraordinary) of financing costs relating to
debt
to be retired (net of tax effect of
$718).................... (1,077)
Write-off (extraordinary) of original issue discount
relating
to debt to be retired (net of tax effect of
$177)............ (266)
Restructuring reserve (net of tax effect of
$3,904)........... (5,855)
Accretion relating to Redeemable
Warrants..................... (8,833)
- ---------
$(173,494)
=========
</TABLE>
(l) Reflects retirement of the Company's Treasury Shares.
Pro forma adjustments have been made to the Pro Forma Combined
Income
Statement to reflect the following (in thousands);
(m) Reflects estimated cost savings of $3.2 million due to an
increase
in credits received from vendors as a result of increased
purchase volumes
with such vendors.
(n) Reflects (i) estimated cost savings as a result of
actions that the
Company expects to undertake pursuant to a plan that has been
approved by the
Board of Directors of USSC and (ii) incremental depreciation
and amortization.
The Company's plan to achieve the cost savings includes
eliminating eight
redundant distribution centers, reducing corporate overhead and
eliminating
redundant sales representatives. USSC is committed to effect
this plan within
one year of the acquisition.
<TABLE>
<S>
<C>
Decrease in selling expenses due to reductions in combined
sales
force................................................... $
(3,840)
Decrease in warehouse and distribution expenses due to
closing
of duplicate
facilities....................................... (8,873)
Decrease in general and administrative expenses due to
elimination of duplicate corporate
overhead................... (10,045)
- --------
Subtotal (not including vendor credits in
(m))............. (22,758)
Incremental amortization of
goodwill....................... 662
Incremental depreciation of plant, property and
equipment.. 5,109
- --------
Net incremental cost savings
$(16,987)
========
</TABLE>
(o) Adjusts interest expense for the following:
<TABLE>
<S>
<C>
Incremental interest expense on
debt........................... $(27,703)
Amortization of financing costs and original issue discount
relating to retired
debt...................................... 1,277
Amortization of financing
costs................................ (2,593)
Accretion of interest on liability recorded relating to
severance payments to be made to the Company's management
personnel under existing employment
contracts................. (864)
- --------
$(29,883)
========
</TABLE>
(p) Reflects income tax effect of the pro forma adjustments.
(q) Reflects adjustment of preferred stock dividends to
reflect
retirement of Series B Preferred Stock.
43
<PAGE>
(c) Exhibits
Exhibit
Number Description
------- -----------
1 Not Applicable.
2 * Agreement and Plan of
Merger, dated as
of February 13, 1995,
between the Company
and Associated (previously
filed as
Exhibit 2 to the Company's
Solicitation/
Recommendation Statement
on Schedule
14D-9 dated February 21,
1995).
4 Not Applicable.
13(a) * Annual Report to
Stockholders for the
fiscal year ended August
31, 1994
(previously filed as
Exhibit 13 to the
Company's Annual Report on
Form 10-K
dated November 22, 1994).
13(b) * Quarterly Report on Form
10-Q for the
Quarterly Period Ended
February 28, 1995
(previously filed with the
Commission on
April 13, 1995).
16 Not Applicable.
17 Not Applicable.
20 Not Applicable
23 Not Applicable
24 Not Applicable.
27 Not Applicable.
--------
* Incorporated by reference - For Exchange Act
filings,
see SEC File No. 0-10653
44
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the
undersigned hereunto duly authorized.
UNITED STATIONERS
INC.
Date: April 14, 1995 By: /s/ Thomas W.
Sturgess
_____________________________
Thomas W.
Sturgess
Chairman
of the Board
45
<PAGE>
UNITED STATIONERS INC.
INDEX TO EXHIBITS
Exhibit
Number Description
------- -----------
1 Not Applicable.
2 * Agreement and Plan of
Merger, dated as
of February 13, 1995,
between the Company
and Associated (previously
filed as
Exhibit 2 to the Company's
Solicitation/
Recommendation Statement
on Schedule
14D-9 dated February 21,
1995).
4 Not Applicable.
13(a) * Annual Report to
Stockholders for the
fiscal year ended August
31, 1994
(previously filed as
Exhibit 13 to the
Company's Annual Report on
Form 10-K
dated November 22, 1994).
13(b) * Quarterly Report on Form
10-Q for the
Quarterly Period Ended
February 28, 1995
(previously filed with the
Commission on
April 13, 1995).
16 Not Applicable.
17 Not Applicable.
20 Not Applicable
23 Not Applicable
24 Not Applicable.
27 Not Applicable.
--------
* Incorporated by reference - For Exchange Act
filings,
see SEC File No. 0-10653
<PAGE>
[LETTERHEAD OF WEIL, GOTSHAL & MANGES APPEARS HERE]
(214) 746-7865 APRIL 14, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: Filing Desk
Re: Untied Stationers Inc.
Current Report on Form 8-K
CIK No. 355999
--------------------------
Ladies and Gentlemen:
On behalf of United Stationers Inc., a Delaware corporation
(the
"Company"), enclosed by electronic transmission for filing
pursuant to Rule
13a-11 promulgated under the Securities Exchange Act of 1934,
as amended, is
the Company's Current Report on Form 8-K, relating to a change
in control of
the Company as a result of the merger of Associated Holdings,
Inc., a Delaware
corporation, with and into the Company.
Should any member of the staff have any questions regarding
the enclosure,
please call the undersigned at the number first written above.
Very truly yours,
/s/ W. Stuart Ogg
W. Stuart Ogg
WSO: trf
Enclosures
cc: The Nasdaq Stock Market, Inc.
Ted S. Rzeszuto, United Stationers, Inc.
