<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
-------------
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to __________________
Commission file numbers: United Stationers Inc.: 0-10653
United Stationers Supply Co.: 33-59811
UNITED STATIONERS INC.
UNITED STATIONERS SUPPLY CO.
----------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
United Stationers Inc.: Delaware United Stationers Inc.: 36-3141189
United Stationers Supply Co.: Illinois United Stationers Supply Co.: 36-2431718
- -------------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
2200 East Golf Road, Des Plaines, Illinois 60016-1267
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (847) 699-5000
Indicate by check mark whether each registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
United Stationers Inc.: Yes (X) No ( )
United Stationers Supply Co.: Yes (X) No ( )
On July 30, 1998, United Stationers Inc. had outstanding 18,334,548 shares of
Common Stock, par value $0.10 per share. On July 30, 1998, United Stationers
Supply Co. had 880,000 shares of Common Stock, $1.00 par value per share,
outstanding; United Stationers Inc. owns 100% of these shares.
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
---------------------------------------------
INDEX
-----
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
- ------------------------------ ----
<S> <C>
IMPORTANT EXPLANATORY NOTE 1
Independent Accountants' Review Report 2
Condensed Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income
for the Three Months and Six Months
ended June 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows
for the Six Months ended June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
PART II - OTHER INFORMATION 18
- ---------------------------
SIGNATURE 20
- ---------
INDEX TO EXHIBITS 21
- -----------------
</TABLE>
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
IMPORTANT EXPLANATORY NOTE
THIS INTEGRATED FORM 10-Q IS FILED PURSUANT TO THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED, FOR EACH OF UNITED STATIONERS INC. ("UNITED"), A DELAWARE
CORPORATION, AND ITS WHOLLY OWNED SUBSIDIARY, UNITED STATIONERS SUPPLY CO.
("USSC"), AN ILLINOIS CORPORATION (COLLECTIVELY, THE "COMPANY"). UNITED
STATIONERS INC. IS A HOLDING COMPANY WITH NO OPERATIONS SEPARATE FROM ITS
OPERATING SUBSIDIARY, UNITED STATIONERS SUPPLY CO. AND ITS SUBSIDIARIES. NO
SEPARATE FINANCIAL INFORMATION FOR UNITED STATIONERS SUPPLY CO. AND ITS
SUBSIDIARIES HAS BEEN PROVIDED HEREIN BECAUSE MANAGEMENT FOR THE COMPANY
BELIEVES SUCH INFORMATION WOULD NOT BE MEANINGFUL BECAUSE (i) UNITED STATIONERS
SUPPLY CO. IS THE ONLY DIRECT SUBSIDIARY OF UNITED STATIONERS INC., WHICH HAS NO
OPERATIONS OTHER THAN THOSE OF UNITED STATIONERS SUPPLY CO. AND (ii) ALL ASSETS
AND LIABILITIES OF UNITED STATIONERS INC. ARE RECORDED ON THE BOOKS OF UNITED
STATIONERS SUPPLY CO. THERE IS NO MATERIAL DIFFERENCE BETWEEN UNITED STATIONERS
INC. AND UNITED STATIONERS SUPPLY CO. FOR THE DISCLOSURE REQUIRED BY THE
INSTRUCTIONS TO FORM 10-Q AND THEREFORE, UNLESS OTHERWISE INDICATED, THE
RESPONSES SET FORTH HEREIN APPLY TO EACH OF UNITED STATIONERS INC. AND UNITED
STATIONERS SUPPLY CO.
-1-
<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
The Board of Directors
United Stationers Inc.
We have reviewed the accompanying condensed consolidated balance sheet of United
Stationers Inc. and Subsidiaries as of June 30, 1998, and the related condensed
consolidated statements of income for the three-month and six-month periods
ended June 30, 1998 and 1997, and the condensed consolidated statements of cash
flows for the six-month periods ended June 30, 1998 and 1997. These financial
statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data, and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, which
will be performed for the full year with the objective of expressing an
opinion regarding the financial statements taken as a whole. Accordingly, we
do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial
statements referred to above for them to be in conformity with generally
accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of United Stationers Inc. as of
December 31, 1997, and the related consolidated statements of income, changes
in stockholders' equity, and cash flows for the year then ended (not
presented herein) and in our report dated January 27, 1998, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of December 31, 1997, is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has
been derived.
/s/Ernst & Young LLP
Chicago, Illinois
July 28, 1998
-2-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
June 30, December 31,
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 21,727 $ 12,367
Accounts receivable, net (see Note 7) 169,357 311,920
Inventories 498,300 511,555
Other current assets 16,730 14,845
----------- -----------
Total current assets 706,114 850,687
Property, plant and equipment, net 163,081 164,543
Goodwill, net 183,631 111,852
Other 17,973 20,939
----------- -----------
Total assets $1,070,799 $1,148,021
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 270,394 $ 236,475
Accrued liabilities 99,087 118,496
Current maturities of long-term debt 5,233 44,267
----------- -----------
Total current liabilities 374,714 399,238
Deferred income taxes 22,688 19,383
Long-term obligations 345,178 506,092
----------- -----------
Total liabilities 742,580 924,713
Stockholders' equity:
Common stock, $0.10 par value; 40,000,000 authorized;
18,326,449 and 15,905,273, respectively, issued and outstanding 1,832 1,591
Additional paid-in capital 301,300 213,042
Retained earnings 25,087 8,675
----------- -----------
Total stockholders' equity 328,219 223,308
----------- -----------
Total liabilities and stockholders' equity $1,070,799 $1,148,021
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
-3-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------------
1998 1997
-------- --------
<S> <C> <C>
Net sales $751,966 $610,041
Cost of goods sold 626,076 505,307
-------- --------
Gross profit 125,890 104,734
-------- --------
Operating expenses:
Warehousing, marketing and
administrative expenses 87,579 73,730
Non-recurring charge (see Note 10) 13,852 --
-------- --------
Total operating expenses 101,431 73,730
-------- --------
Income from operations 24,459 31,004
Interest expense 9,516 13,867
Other expense (see Note 7) 2,386 --
-------- --------
Income before income taxes and extraordinary item 12,557 17,137
Income taxes 5,328 7,267
-------- --------
Income before extraordinary item 7,229 9,870
Extraordinary item, loss on early retirement of
debt, net of tax benefit of $3,971 (5,907) --
-------- --------
Net income 1,322 9,870
Preferred stock dividends issued and accrued -- 462
-------- --------
Net income attributable to common stockholders $ 1,322 $ 9,408
-------- --------
-------- --------
Net income per common share:
Income before extraordinary item $ 0.44 $ 0.77
Extraordinary item (0.36) --
-------- --------
Net income per share $ 0.08 $ 0.77
-------- --------
-------- --------
Average number of common shares outstanding 16,499 12,205
Net income per common share - assuming dilution:
Income before extraordinary item $ 0.42 $ 0.64
Extraordinary item (0.34) --
-------- --------
Net income per share $ 0.08 $ 0.64
-------- --------
-------- --------
Average number of common shares outstanding -
assuming dilution 17,365 14,637
</TABLE>
See notes to condensed consolidated financial statements.
-4-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
1998 1997
---------- ----------
<S> <C> <C>
Net sales $1,464,483 $1,245,062
Cost of goods sold 1,215,531 1,031,586
---------- ----------
Gross profit 248,952 213,476
Operating expenses:
Warehousing, marketing and
administrative expenses 172,616 150,434
Non-recurring charge (see Note 10) 13,852 --
---------- ----------
Total operating expenses 186,468 150,434
---------- ----------
Income from operations 62,484 63,042
Interest expense 21,342 28,528
Other expense (see Note 7) 2,386 --
---------- ----------
Income before income taxes and extraordinary item 38,756 34,514
Income taxes 16,436 14,635
---------- ----------
Income before extraordinary item 22,320 19,879
Extraordinary item, loss on early retirement of
debt, net of tax benefit of $3,971 (5,907) --
---------- ----------
Net income 16,413 19,879
Preferred stock dividends issued and accrued -- 917
---------- ----------
Net income attributable to common stockholders $ 16,413 $ 18,962
---------- ----------
---------- ----------
Net income per common share:
Income before extraordinary item $ 1.37 $ 1.55
Extraordinary item (0.36) --
---------- ----------
Net income per share $ 1.01 $ 1.55
---------- ----------
---------- ----------
Average number of common shares outstanding 16,249 12,205
Net income per common share - assuming dilution:
Income before extraordinary item $ 1.29 $ 1.30
Extraordinary item (0.34) --
---------- ----------
Net income per share $ 0.95 $ 1.30
---------- ----------
---------- ----------
Average number of common shares outstanding -
assuming dilution 17,259 14,624
</TABLE>
See notes to condensed consolidated financial statements.
-5-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 16,413 $ 19,879
Depreciation and amortization 14,278 13,581
Amortization of capitalized financing costs 1,326 2,269
Extraordinary item - early retirement of debt 9,877 --
Changes in operating assets and liabilities (see Note 7) 222,703 57,175
--------- ---------
Net cash provided by operating activities 264,597 92,904
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (8,500) (4,482)
Proceeds from disposition of property, plant
and equipment 20 31
Acquisition of Azerty, Inc., net of cash acquired of $2,575 (115,740) --
--------- ---------
Net cash used in investing activities (124,220) (4,451)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement and principal payments of debt (547,585) (34,808)
Borrowings under financing agreements 350,000 --
Net repayments under revolver (11,000) (46,000)
Issuance of common shares 97,024 --
Payment of employee withholding tax related to
stock option exercises (14,411) --
Financing costs (4,526) --
Other (519) 49
--------- ---------
Net cash used in financing activities (131,017) (80,759)
--------- ---------
Net change in cash and cash equivalents 9,360 7,694
Cash and cash equivalents, beginning of period 12,367 10,619
--------- ---------
Cash and cash equivalents, end of period $ 21,727 $ 18,313
--------- ---------
--------- ---------
Other Cash Flow Information:
Cash payments during the six months for:
Income taxes paid $ 16,993 $ 8,936
Interest paid 19,553 24,007
</TABLE>
See notes to condensed consolidated financial statements.
-6-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited,
except for the Consolidated Balance Sheet as of December 31, 1997. These
financial statements have been prepared in accordance with the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. In the opinion of the Company's
management, the condensed consolidated financial statements for the unaudited
interim periods presented include all adjustments necessary to fairly present
the results of such interim periods and the financial position as of the end of
said periods. Certain interim expense and inventory estimates are recognized
throughout the year relating to marginal income tax rates, shrinkage, price
changes and product mix. Any refinements to these estimates based on actual
experience are recorded when known.
2. OPERATIONS
The Company is a national wholesale distributor of business products. The
Company offers approximately 35,000 items from more than 550 manufacturers.
This includes a broad spectrum of office products, computer supplies, office
furniture and facilities management supplies. The Company primarily serves
commercial and contract office products dealers. Its customers include more
than 20,000 resellers -- such as computer products resellers, office
furniture dealers, mass merchandisers, sanitary supply distributors,
warehouse clubs, mail order houses and office products superstores. The
Company has a distribution network of 40 business products distribution
centers, 19 janitorial and sanitation distribution centers and 5 computer
consumables distribution centers. In addition to its broad product offering,
the Company provides value-added marketing and logistics services for both
manufacturers and resellers.
3. COMPREHENSIVE INCOME
As of January 1, 1998, the Company adopted Financial Accounting Standards
Statement 130, "Reporting Comprehensive Income." Statement 130 establishes
new rules for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on the
Company's net income or stockholders' equity. Statement 130 requires foreign
currency translation adjustments, which prior to adoption were included in
stockholders' equity, to be included in other comprehensive income.
For the three-month and six-month periods ended June 30, 1998 and 1997, total
comprehensive income amounted to $931,300, $8,936,300, $15,899,000 and
$18,918,000, respectively.
-7-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common share is based on net income after preferred stock
dividend requirements. Basic earnings per share is calculated on the
weighted average number of common shares outstanding. Diluted earnings per
share is calculated on the weighted average number of common and common
equivalent shares outstanding during the period. Stock options and warrants
are considered to be common equivalent shares.
The following table sets forth the computation of basic and diluted earnings
per share (in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
NUMERATOR:
Income before extraordinary item $ 7,229 $ 9,870 $22,320 $19,879
Extraordinary item (5,907) -- (5,907) --
-------- -------- -------- --------
Net income 1,322 9,870 16,413 19,879
Preferred stock dividends issued and accrued -- 462 -- 917
-------- -------- -------- --------
Net income attributable to common
stockholders $ 1,322 $ 9,408 $16,413 $18,962
-------- -------- -------- --------
-------- -------- -------- --------
DENOMINATOR:
Denominator for basic earnings per share -
Weighted average shares 16,499 12,205 16,249 12,205
Effect of dilutive securities:
Employee stock options 866 1,029 1,010 1,016
Warrants -- 1,403 -- 1,403
-------- -------- -------- --------
Dilutive potential common shares 866 2,432 1,010 2,419
-------- -------- -------- --------
Denominator for diluted earnings per share -
Adjusted weighted average shares
and assumed conversions 17,365 14,637 17,259 14,624
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per common share:
Basic
Income before extraordinary item $ 0.44 $ 0.77 $ 1.37 $ 1.55
Extraordinary item (0.36) -- (0.36) --
-------- -------- -------- --------
Net income per share $ 0.08 $ 0.77 $ 1.01 $ 1.55
-------- -------- -------- --------
-------- -------- -------- --------
Diluted
Income before extraordinary item $ 0.42 $ 0.64 $ 1.29 $ 1.30
Extraordinary item (0.34) -- (0.34) --
-------- -------- -------- --------
Net income per share $ 0.08 $ 0.64 $ 0.95 $ 1.30
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
-8-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
5. AZERTY ACQUISITION
On April 3, 1998, the Company completed the acquisition of all of the capital
stock of Azerty Incorporated, Azerty de Mexico, S.A. de C.V., Positive ID
Wholesale Inc., and AP Support Services Incorporated (collectively, the
"Azerty Acquisition"), which together comprised substantially all of the
United States and Mexican operations of the Office Products Division of
Abitibi-Consolidated Inc. (collectively, the "Azerty Business"). The
aggregate purchase price paid by the Company for the Azerty Business was
approximately $115.7 million (including fees and expenses) following an
initial post-closing adjustment, and subject to final audit and review by the
Company. The purchase price for the Azerty Business was funded from
borrowings under the Company's New Credit Facilities (as defined). The
Azerty Business is primarily a specialty wholesaler of computer consumables,
peripherals and accessories in the United States and Mexico. The Company's
existing Micro United division will be integrated into the Azerty Business.
6. THE NEW CREDIT FACILITIES
On April 3, 1998, in order to fund the purchase price of the Azerty Business,
refinance borrowings under the Company's then-existing senior secured credit
facilities, and pay related fees and expenses in connection therewith, the
Company amended and restated its existing credit agreement (as amended and
restated, the "New Credit Agreement") governing its senior secured credit
facilities (the "New Credit Facilities"). The New Credit Facilities consisted
initially of a $250.0 million six-year revolving credit facility (the "Revolving
Credit Facility"), a $150 million six-year tranche A term loan facility (the
"Tranche A Term Loan Facility"), and a $100.0 million six and three-quarter year
tranche B term loan facility (the "Tranche B Term Loan Facility"). The net
proceeds of the Notes Offering (as defined) were used to permanently repay a
substantial portion of indebtedness outstanding under the Tranche B Term Loan
Facility and the remainder of such facility was permanently repaid with proceeds
from the sale of certain receivables, following which the Tranche B Term Loan
Facility was terminated. As a result of the early retirement of the Existing
Credit Facilities, approximately $9.9 million ($5.9 million net of tax benefit
of $4.0 million) of unamortized financing fees were recorded as a non-cash
extraordinary charge during the second quarter of 1998.
7. RECEIVABLES SECURITIZATION PROGRAM
On April 3, 1998, in connection with the refinancing of its Existing Credit
Facilities, the Company entered into a $163.0 million 364-day liquidity
facility (the "Receivables Securitization Program"), pursuant to which the
Company sells certain of its U.S. dollar trade receivables to a wholly-owned
offshore bankruptcy-remote subsidiary of the Company (the "Receivables
Company"). The Receivables Company then transfers the Eligible Receivables
to a third-party, multi-seller asset-backed commercial paper program existing
solely for the purpose of issuing commercial paper rated A-1/P-1 or higher.
Costs related to this facility vary on a monthly basis and are generally
related to certain interest rates. These costs are included in other expense.
The condensed consolidated balance sheet at June 30, 1998 and the condensed
consolidated statement of cash flows for the six months ended June 30, 1998
reflect the sale of approximately $159.0 million in trade accounts
receivable. The proceeds to the Company were used to reduce borrowings under
the New Credit Facilities.
-9-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. THE NOTES OFFERING
On April 15, 1998, USSC consummated the sale of $100.0 million of its 8.375%
Senior Subordinated Notes due 2008 (the "8.375% Notes"). The aggregate net
proceeds to the Company (aggregating approximately $97.0 million) from the
sale of the 8.375% Notes were used to repay a substantial portion of
indebtedness outstanding under the Tranche B Term Loan Facility.
9. JUNE EQUITY OFFERING
In June 1998, United completed an offering of 2,005,507 shares of Common
Stock (the "June Equity Offering"), consisting of 1,500,000 primary shares
sold by United, and 505,507 secondary shares sold by certain selling
stockholders. The aggregate net proceeds to United of approximately $77.1
million were delivered to USSC and used to repay a portion of indebtedness
under the Tranche A Term Loan Facility which caused a permanent reduction of
the amount borrowable thereunder.
United did not receive any of the proceeds from the sale of the 505,507 shares
of Common Stock offered by the selling stockholders, other than an aggregate of
approximately $6.4 million paid by the selling stockholders upon exercise of
employee stock options in connection with the June Equity Offering, which were
delivered to USSC and applied to the repayment of indebtedness under the New
Credit Facilities.
Subsequent to the closing of the June Equity Offering, the underwriters for
the offering exercised an overallotment option to purchase an additional
200,000 shares from United (the "Additional Shares"). The net proceeds to
United of approximately $10.3 million from the sale of Additional Shares were
delivered to USSC and used to repay an additional portion of the indebtedness
outstanding under the Tranche A Term Loan Facility.
10. COMPUTER SERVICES CONTRACT WRITE-OFF -- NON RECURRING CHARGE
Associated Stationers, Inc. ("ASI") entered into a Computer Services Contract
with a third-party service provider to perform certain computer services.
Upon completion of the systems integration between USSC and ASI, increasing
differences in the operating processes and technical environment between the
Company and the third party service provider became evident. The Computer
Services Contract was modified to allow the Company, at its discretion, not
to perform any processing at the third-party service provider's facilities.
Accordingly, the related fees were reduced. Payments made to the third-party
service provider subsequent to this final renegotiation were effectively for
disaster recovery purposes only. The Company has recently consolidated its
disaster recovery services under an agreement with another third-party
service provider. In May 1998, the Company completed an assessment of the
future utility of the Computer Services Contract. Based upon such
assessment, the Company has determined that it is no longer feasible to use
the prior third-party service provider for disaster recovery purposes.
During the second quarter, the Company wrote off the remaining term of the
Computer Services Contract. As a result, the Company recorded a non-recurring
charge of $13.9 million ($8.3 million net of tax benefit of $5.6 million), which
includes a $2.6 million prepaid expense and $11.3 million of future payments.
-10-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
11. SUMMARIZED FINANCIAL DATA FOR GUARANTOR SUBSIDIARIES
Azerty Incorporated, Positive ID Wholesale Inc., and AP Support Services
Incorporated (collectively, the "Azerty Guarantor Subsidiaries") and Lagasse
Bros., Inc. ("Lagasse") guarantee the 8.375% Senior Subordinated Notes due
2008 (the "Notes") issued by United Stationers Supply Co. ("USSC"). The
Azerty Guarantor Subsidiaries and Azerty de Mexico, S.A. de C.V.
(collectively, the "Azerty Business") were acquired on April 3, 1998.
Set forth below is summarized combined financial data for Lagasse and the
Azerty Business (subsequent to its acquisition by USSC). Summarized combined
financial data as of June 30, 1998 and for the three months then ended
reflects both Lagasse and the Azerty Business. The summarized combined
income statement data for the six months ended June 30, 1998 reflects the
operations of Lagasse for the six-month period and the Azerty Business for
the three months ended June 30, 1998. Summarized financial data as of
December 31, 1997 and for the three and six-month period ended June 30, 1997
reflect Lagasse only.
<TABLE>
<CAPTION>
As of As of
June 30, December 31,
1998 1997
-------- ------------
<S> <C> <C>
Balance Sheet Data:
Current assets $130,562 $29,731
Total assets 247,882 68,766
Current liabilities 70,122 13,564
Total liabilities 72,532 18,490
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1998 1997 1998 1997
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales $121,447 $23,513 $148,372 $45,489
Gross margin 12,933 4,251 18,006 8,170
Operating income 4,370 2,086 6,525 3,912
Net income 2,104 1,166 3,176 2,147
</TABLE>
Set forth below is summarized combined financial data for the Azerty Business
for periods prior to its acquisition by USSC.
<TABLE>
<CAPTION>
As of
December 31,
1997
------------
<S> <C>
Balance Sheet Data:
Current assets $ 83,986
Total assets 105,993
Current liabilities 51,678
Total liabilities 74,460
</TABLE>
-11-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months
Ended Ended Ended
March 31, 1998 June 30, 1997 June 30, 1997
-------------- ------------- -------------
<S> <C> <C> <C>
Income Statement Data:
Net sales $99,723 $88,870 $177,237
Gross margin 8,673 7,561 15,538
Operating income 2,454 2,577 5,259
Net income 1,147 1,393 2,758
</TABLE>
-12-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
COMMENTS ON FORWARD LOOKING INFORMATION
With the exception of statements with regard to historical matters, the matters
discussed in this Form 10-Q contain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements involve risks and uncertainties which could cause
actual results to differ materially from the forward-looking information. Such
risks and uncertainties include, but are not limited to, the highly-competitive
environment in which the company operates, the integration of acquisitions,
changes in end-users' traditional demands for business products, reliance by the
company on certain key suppliers, and the effects on the Company of fluctuations
in manufacturers' pricing and general economic conditions. A description of
these factors, as well as other factors which could affect the Company's
business, is set forth in filings by the Company with the Securities and
Exchange Commission, including the Company's Prospectus dated June 10, 1998.
NET SALES. Net sales were $752.0 million in the second quarter of 1998, a 23.3%
increase over net sales of $610.0 million in the second quarter of 1997. The
Company experienced sales strength in all geographic regions and across all
product categories. Organic sales (excluding the impact of acquisitions) in the
second quarter of 1998 increased by 8.3%.
United Stationers' strategy is to create value in the supply chain for both
resellers and manufacturers. By reducing the overall cost of distribution, the
Company believes its role as a wholesaler will continue to expand and that it
can achieve above industry-average growth rates.
The Company believes that it has the opportunity to capture a portion of the
sales of business products currently sold directly by manufacturers to
resellers without wholesaler involvement. Currently, approximately 20%
of manufacturers' shipments of business products move through wholesalers.
The Company believes that as resellers intensify their focus on asset
management, return on investment and inventory efficiency, they will continue
de-stocking and increasingly rely on United Stationers' products and services
to meet end-user requirements for a high order fill rate on a broad product
assortment available on an overnight basis.
The Company plans to continue to expand its customer base by: (i) maintaining
and building its business with commercial dealers and contract stationers; (ii)
developing additional programs for marketing and buying groups; (iii) continuing
to focus on complementary markets, including specialty dealers; and (iv)
expanding geographically, both within the United States and, potentially,
internationally.
The Company plans to expand its product line. These plans include developing
its newer product categories, such as office furniture, computer supplies and
peripherals, facilities management supplies and janitorial and sanitation
supplies, as well as potentially offering new products or services. The Company
also plans to continue to expand its line of private brand products.
The Company believes that its various products and services are complementary
and that there are significant opportunities to cross-sell to existing
customers. By implementing this strategy, management believes the Company can
enhance sales as resellers purchase a broader selection of products offered by
the Company, thereby reducing end-user procurement costs and enhancing reseller
profitability.
-13-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company intends to continue to invest in information systems enhancements
and customer interfaces that management believes will allow it to capture a
growing percentage of its customers' business. In addition, as the Internet
becomes increasingly important as a marketing channel, the Company is positioned
to participate in this trend with direct, on-line access by its resellers to its
25,000 SKU general line catalog.
The Company believes it can enhance its growth by continuing to make strategic
acquisitions. For example, the acquisition of Lagasse Bros., Inc. ("Lagasse")
in 1996 substantially increased the Company's position in the janitorial and
sanitation supplies product category. The April 1998 Azerty Acquisition has
also expanded the Company's product offerings and made it one of the largest
distributors of computer consumable supplies in the United States. The Company
intends to continue, from time to time, to pursue acquisitions that expand its
customer base, increase its geographic reach and/or broaden its product
offering.
GROSS MARGIN. Gross margin declined to 16.7% in the second quarter of 1998
compared with 17.2% in 1997. This decrease is primarily the result of blending
lower-margin computer consumables into the Company's overall margin mix.
Increases in vendor allowances in the first half of the year partially offset
the margin decline due to change in product mix discussed above.
OPERATING EXPENSES. Operating expenses as a percent of net sales, before the
non-recurring charge, declined to 11.6% in 1998 compared with 12.1% in 1997.
The non-recurring charge recorded in 1998 of $13.9 million ($8.3 million net
of tax benefit of $5.6 million) relates to the write-off of a contract for
computer services from a vendor. The reduction in the operating expense
ratio represents the blending of the Azerty business, which operates at a
lower expense ratio than USSC, into the Company's overall expense ratio.
Operating expenses as a percent of net sales, including the aforementioned
charges, was 13.5% in 1998.
INCOME FROM OPERATIONS. Income from operations as a percent of net sales,
before the non-recurring charge, remained flat at 5.1%. Including the
non-recurring charge, income from operations as a percent of net sales was
3.2%.
INTEREST EXPENSE. Interest expense as a percent of net sales was 1.3%
compared with 2.3% in 1997. This reduction reflects the continued leveraging
of fixed interest costs against higher sales and the repayment of
indebtedness with the proceeds received from the June Equity Offering, the
Receivables Securitization Program, and the October 1997 equity offering.
These transactions were partially offset by the acquisition of Azerty for a
purchase price of approximately $115.7 million and the placement of $100.0
million of Senior Subordinated Notes at 8.375%.
OTHER EXPENSE. Other expense as a percent of net sales was 0.3% in 1998.
This expense represents the ongoing costs associated with the sale of certain
trade accounts receivable through an asset-backed securitization program.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income
taxes and extraordinary item as a percent of net sales, excluding the impact
of the non-recurring charge, increased to 3.5% from 2.8% in 1997. Including
the non-recurring charge, income before income taxes and extraordinary item
as a percent of net sales was 1.6%.
NET INCOME. Net income in 1998 includes a non-recurring charge of $13.9 million
($8.3 million net of tax benefit of $5.6 million) and an extraordinary item,
loss on the early retirement of debt of $9.9 million ($5.9 million net of tax
benefit of $4.0 million). Net income as a percent of net sales, excluding the
impact of the non-recurring charge and the extraordinary item, increased to 2.1%
compared with 1.6% in 1997. Including the impact of the non-recurring charge and
the extraordinary item, net income as a percent of net sales was 0.2% in 1998.
-14-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
NET SALES. Net sales for the first six months of 1998 were $1.5 billion, up
17.6%, compared with $1.2 billion in 1997. The Company experienced sales
strength in all geographic regions and across all product categories.
GROSS MARGIN. Gross margin declined to 17.0% in the second quarter of 1998
compared with 17.2% in 1997. This decrease is primarily the result of blending
lower-margin computer consumables into the Company's overall margin mix.
Increases in vendor allowances in the first half of the year partially offset
the margin decline due to change in product mix discussed above.
OPERATING EXPENSES. Operating expenses as a percent of net sales, before the
non-recurring charge, declined to 11.8% in 1998 compared with 12.1% in 1997.
The non-recurring charge recorded in the second 1998 of $13.9 million ($8.3
million net of tax benefit of $5.6 million) relates to the write-off of a
contract for computer services from a vendor. The reduction in the operating
expense ratio represents the blending of the Azerty business, which operates
at a lower expense ratio than USSC, into the Company's overall expense ratio.
Operating expenses as a percent of net sales, including the aforementioned
charges, was 12.7% in 1998.
INCOME FROM OPERATIONS. Income from operations as a percent of net sales,
before the non-recurring charge, remained relatively flat at 5.2% in 1998
compared with 5.1% in 1997. Including the non-recurring charge, income from
operations as a percent of net sales was 4.3%.
INTEREST EXPENSE. Interest expense as a percent of net sales was 1.5%
compared with 2.3% in 1997. This reduction reflects the continued leveraging
of fixed interest costs against higher sales and the repayment of
indebtedness with the proceeds received from the June Equity Offering, the
Receivables Securitization Program, and the October 1997 equity offering.
These transactions were partially offset by the acquisition of Azerty for a
purchase price of $115.7 million and the placement of $100.0 million of
Senior Subordinated Notes at 8.375%.
OTHER EXPENSE. Other expense as a percent of net sales was 0.2% in 1998.
This expense represents the ongoing costs associated with the sale of certain
trade accounts receivable through an asset-backed securitization program.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income
taxes and extraordinary item as a percent of net sales, excluding the impact
of the non-recurring charge, increased to 3.5% from 2.8% in 1997. Including
the non-recurring charge, income before income taxes and extraordinary item
as a percent of net sales was 2.6%.
NET INCOME. Net income in 1998 includes a non-recurring charge of $13.9 million
($8.3 million net of tax benefit of $5.6 million) and an extraordinary item,
loss on the early retirement of debt of $9.9 million ($5.9 million net of tax
benefit of $4.0 million). Net income as a percent of net sales, excluding the
impact of the non-recurring charge and the extraordinary item, increased to 2.1%
compared with 1.6% in 1997. Including the impact of the non-recurring charge and
the extraordinary item, net income as a percent of net sales was 1.1% in 1998.
-15-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the credit facilities under the Amended and Restated Credit
Agreement (the "New Credit Agreement") consisted of $61.5 million of term loan
borrowings (the "Term Loan Facilities"), and $35.0 million of borrowings under a
$250.0 million revolving credit facility (the "Revolving Credit Facility"). In
addition, the Company has $100.0 million of 12.75% Senior Subordinated Notes due
2005, $100.0 million of 8.375% Senior Subordinated Notes due 2008, $29.8 million
of industrial revenue bonds and a $1.9 million mortgage.
The Term Loan Facilities consist of a $61.5 million tranche A term loan facility
(the "Tranche A Term Loan Facility"), which is scheduled to mature on or about
March 31, 2004. The term loans under the Tranche A Term Loan Facility are
repayable in consecutive quarterly installments which began on June 30, 1998,
the first four of which are each in the amount of $1.0 million, the next four of
which are each in the amount of $1.5 million, the next four of which are each in
the amount of $2.6 million, the next four of which are each in the amount of
$3.1 million and the last eight of which are each in the amount of $3.7 million.
The loans under the Tranche A Term Loan Facility and the Revolving Credit
Facility generally bear interest as determined within a set range with the rate
based on the ratio of total debt (which excludes the face amount of any undrawn
letters of credit) of United and its subsidiaries to EBITDA (as defined in the
New Credit Agreement). The Tranche A Term Loan Facility and the Revolving
Credit Facility bear interest, at the option of the Company and based upon
financial performance, at the base rate (i.e., the higher of the prime rate or
federal funds plus 0.50%) plus 0% to 0.75% or LIBOR plus 1.00% to 2.00%.
The Credit Agreement contains representations and warranties, affirmative and
negative covenants and events of default customary for financings of this type.
As of June 30, 1998, the Company was in compliance with all covenants contained
in the Credit Agreement.
Management believes that the Company's cash on hand, anticipated funds generated
from operations and available borrowings under the Credit Agreement, will be
sufficient to meet the short-term (less than twelve months) and long-term
operating and capital needs of the Company, as well as to service its debt in
accordance with its terms. There is, however, no assurance that this will be
accomplished.
United is a holding company and, as a result, its primary source of funds is
cash generated from operating activities of its operating subsidiary, USSC,
and bank borrowings by USSC. The New Credit Agreement, 8.375% Notes
Indenture and the 12.75% Note Indenture contain restrictions on the ability
of USSC to transfer cash to United.
The statements of cash flows for the Company for the periods indicated are
summarized below:
<TABLE>
<CAPTION>
For the Six Months
Ended June 30,
------------------------
1998 1997
---------- ---------
(dollars in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 264,597 $ 92,904
Net cash used in investing activities (124,220) (4,451)
Net cash used in financing activities (131,017) (80,759)
</TABLE>
Net cash provided by operating activities during the first six months of 1998
increased to $264.6 million from $92.9 million in the comparable prior-year
period. This increase was primarily the result of a decrease in accounts
receivable resulting from the sale of certain trade accounts receivable through
an asset-backed securitization program and a decrease in inventory.
-16-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Net cash used in investing activities during the first six months of 1998 was
$124.2 million compared with $4.5 million used in the first six months of 1997.
The increase in cash used was primarily due to the acquisition of Azerty Inc.
and an increase in capital expenditures.
Net cash used in financing activities during the first six months of 1998 was
$131.0 million compared with $80.8 million for the first six months of 1997.
This increase was due primarily to the reduction of debt using proceeds
received from the June Equity Offering and the sale of certain trade accounts
receivable through an asset-backed securitization program.
Receivables Securitization Program
On April 3, 1998, in connection with the refinancing of its Existing Credit
Facilities, the Company entered into the $163.0 million 364-day Receivables
Securitization Program pursuant to which the Company sells its Eligible
Receivables (except for certain excluded receivables, which initially includes
all receivables from the Azerty Business and Lagasse) to the Receivables
Company, a wholly-owned offshore, bankruptcy-remote special purpose limited
liability company, which in turn ultimately transfers the Eligible Receivables
to a third-party, multi-seller asset-backed commercial paper program existing
solely for the purpose of issuing commercial paper rated A-1/P-1 or higher. The
sale of trade receivables includes not only those Eligible Receivables that were
existing on the closing date of the Receivables Securitization Program, but also
Eligible Receivables created thereafter.
The Chase Manhattan Bank acts as funding agent and, together with other
commercial banks rated at least A-1/P-1, provides standby liquidity funding to
support the purchase of the receivables by the Receivables Company. The
proceeds from the Receivables Securitization Program were used to reduce
borrowings under the Company's Revolving Credit Facility. The Receivables
Company retains an interest in the Eligible Receivables transferred to the third
party. The Receivables Securitization Program carries an effective interest
rate of LIBOR plus 0.37%. As a result of the Receivables Securitization
Program, actual balance sheet assets of the Company as of June 30, 1998 of
approximately $159.0 million, consisting of accounts receivable, have been sold
to the Receivables Company and do not secure the Company's obligations under the
New Credit Facilities.
-17-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable
ITEM 2 CHANGES IN SECURITIES
Not applicable
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Stockholders of United Stationers Inc. held
on May 13, 1998, the following matter was voted on:
1. ELECTION OF DIRECTORS
Each of the following members of the Board of Directors was
elected for the term listed below:
Class III Directors - term expiring in May 2001:
-- Randall W. Larrimore
-- Benson P. Shapiro
-- Roy W. Haley
2. NONEMPLOYEE DIRECTORS' DEFERRED STOCK COMPENSATION PLAN
Approval of United Stationers Inc. Nonemployee Directors'
Deferred Stock
Compensation Plan
<TABLE>
<CAPTION>
Number of Votes
---------------------------------------------------
For Against Abstain
<S> <C> <C>
14,259,141 106,242 42,415
</TABLE>
ITEM 5 OTHER INFORMATION
Not applicable
-18-
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibit
Number
-------
<S> <C>
2 Not applicable
10 Not applicable
11 Not applicable
15.1 Letter regarding unaudited interim
financial information
18 Not applicable
19 Not applicable
22 Not applicable
23 Not applicable
24 Not applicable
27.1 Financial Data Schedule - United Stationers Inc.
(1997)
27.2 Financial Data Schedule - United Stationers Inc.
(1998)
27.3 Financial Data Schedule - United Stationers Supply
Co. (1997)
27.4 Financial Data Schedule - United Stationers Supply
Co. (1998)
99 Not applicable
</TABLE>
-19-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED STATIONERS INC.
UNITED STATIONERS SUPPLY CO.
---------------------------------------
(Registrant)
Date: August 12, 1998 /s/ Daniel H. Bushell
--------------- ---------------------------------------
Daniel H. Bushell
Executive Vice President and
Chief Financial Officer
-20-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
(a) Exhibit
Number
-------
<S> <C>
2 Not applicable
10 Not applicable
11 Not applicable
15.1 Letter regarding unaudited interim
financial information
18 Not applicable
19 Not applicable
22 Not applicable
23 Not applicable
24 Not applicable
27.1 Financial Data Schedule - United Stationers Inc.
(1997)
27.2 Financial Data Schedule - United Stationers Inc.
(1998)
27.3 Financial Data Schedule - United Stationers Supply
Co. (1997)
27.4 Financial Data Schedule - United Stationers Supply
Co. (1998)
99 Not applicable
</TABLE>
-21-
<PAGE>
Exhibit 15
August 12, 1998
The Board of Directors
United Stationers Inc.
We are aware of the incorporation by reference in the Registration Statements on
Forms S-3 (No. 333-02247) and S-8 of United Stationers Inc. for the registration
of 2,035,243 and 4,100,000 shares of its common stock, respectively, and in the
Registration Statement on Form S-4 of United Stationers Supply Co. for the
registration of $100,000,000 of 8-3/8% Senior Subordinated Notes due 2008 of our
report dated July 28, 1998 relating to the unaudited condensed consolidated
interim financial statements of United Stationers Inc. which are included in its
Form 10-Q for the quarter ended June 30, 1998.
/s/Ernst & Young LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<CIK> 0000355999
<NAME> UNITED STATIONERS INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 18,313 18,313
<SECURITIES> 0 0
<RECEIVABLES> 255,826 255,826
<ALLOWANCES> 7,061 7,061
<INVENTORY> 262,887 282,887
<CURRENT-ASSETS> 730,660 730,660
<PP&E> 229,268 229,268
<DEPRECIATION> 62,385 62,385
<TOTAL-ASSETS> 1,039,125 1,039,125
<CURRENT-LIABILITIES> 353,660 353,660
<BONDS> 0 0
20,702 20,702
0 0
<COMMON> 1,153 1,153
<OTHER-SE> 86,551 86,551
<TOTAL-LIABILITY-AND-EQUITY> 1,039,125 1,039,125
<SALES> 610,041 1,245,062
<TOTAL-REVENUES> 610,041 1,245,062
<CGS> 505,307 1,031,586
<TOTAL-COSTS> 505,307 1,031,586
<OTHER-EXPENSES> 73,638 148,756
<LOSS-PROVISION> 92 1,678
<INTEREST-EXPENSE> 13,867 28,528
<INCOME-PRETAX> 17,137 34,514
<INCOME-TAX> 7,267 14,635
<INCOME-CONTINUING> 9,870 19,879
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,870 18,879
<EPS-PRIMARY> 0.77 1.55
<EPS-DILUTED> 0.64 1.30
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000355999
<NAME> UNITED STATIONERS, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 21,727 21,727
<SECURITIES> 0 0
<RECEIVABLES> 179,259 179,259
<ALLOWANCES> 9,902 9,902
<INVENTORY> 498,300 498,300
<CURRENT-ASSETS> 706,114 706,114
<PP&E> 252,237 252,237
<DEPRECIATION> 89,156 89,156
<TOTAL-ASSETS> 1,070,799 1,070,799
<CURRENT-LIABILITIES> 374,714 374,714
<BONDS> 0 0
0 0
0 0
<COMMON> 1,832 1,832
<OTHER-SE> 326,387 326,387
<TOTAL-LIABILITY-AND-EQUITY> 1,070,799 1,070,799
<SALES> 751,966 1,464,483
<TOTAL-REVENUES> 751,966 1,464,483
<CGS> 626,076 1,215,531
<TOTAL-COSTS> 626,076 1,215,531
<OTHER-EXPENSES> 101,607 186,061
<LOSS-PROVISION> 2,210 2,793
<INTEREST-EXPENSE> 9,516 21,342
<INCOME-PRETAX> 12,557 38,756
<INCOME-TAX> 5,328 16,436
<INCOME-CONTINUING> 7,229 22,320
<DISCONTINUED> 0 0
<EXTRAORDINARY> (5,907) (5,907)
<CHANGES> 0 0
<NET-INCOME> 1,322 16,413
<EPS-PRIMARY> .08 1.01
<EPS-DILUTED> .08 .95
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<CIK> 0000945633
<NAME> UNITED STATIONERS SUPPLY CO.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 18,313 18,313
<SECURITIES> 0 0
<RECEIVABLES> 255,826 255,826
<ALLOWANCES> 7,061 7,061
<INVENTORY> 262,887 262,887
<CURRENT-ASSETS> 730,660 730,660
<PP&E> 229,268 229,268
<DEPRECIATION> 62,385 62,385
<TOTAL-ASSETS> 1,039,125 1,039,125
<CURRENT-LIABILITIES> 353,660 353,660
<BONDS> 0 0
20,702 20,702
0 0
<COMMON> 1,153 1,153
<OTHER-SE> 86,551 86,551
<TOTAL-LIABILITY-AND-EQUITY> 1,039,125 1,039,125
<SALES> 610,041 1,245,062
<TOTAL-REVENUES> 610,041 1,245,062
<CGS> 505,307 1,031,586
<TOTAL-COSTS> 505,307 1,031,586
<OTHER-EXPENSES> 73,638 148,756
<LOSS-PROVISION> 92 1,678
<INTEREST-EXPENSE> 13,867 28,528
<INCOME-PRETAX> 17,137 34,514
<INCOME-TAX> 7,267 14,635
<INCOME-CONTINUING> 9,870 19,879
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,870 19,879
<EPS-PRIMARY> 0.77 1.55
<EPS-DILUTED> 0.64 1.30
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000945633
<NAME> UNITED STATIONERS SUPPLY CO.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 21,727 21,727
<SECURITIES> 0 0
<RECEIVABLES> 179,259 179,259
<ALLOWANCES> 9,902 9,902
<INVENTORY> 498,300 498,300
<CURRENT-ASSETS> 706,114 706,114
<PP&E> 252,237 252,237
<DEPRECIATION> 89,156 89,156
<TOTAL-ASSETS> 1,070,799 1,070,799
<CURRENT-LIABILITIES> 374,714 374,714
<BONDS> 0 0
0 0
0 0
<COMMON> 1,832 1,832
<OTHER-SE> 326,387 326,387
<TOTAL-LIABILITY-AND-EQUITY> 1,070,799 1,070,799
<SALES> 751,966 1,464,483
<TOTAL-REVENUES> 751,966 1,464,483
<CGS> 626,076 1,215,531
<TOTAL-COSTS> 626,076 1,215,531
<OTHER-EXPENSES> 101,607 186,061
<LOSS-PROVISION> 2,210 2,793
<INTEREST-EXPENSE> 9,516 21,342
<INCOME-PRETAX> 12,557 38,756
<INCOME-TAX> 5,328 16,436
<INCOME-CONTINUING> 7,229 22,320
<DISCONTINUED> 0 0
<EXTRAORDINARY> (5,907) (5,907)
<CHANGES> 0 0
<NET-INCOME> 1,322 16,413
<EPS-PRIMARY> .08 1.01
<EPS-DILUTED> .08 .95
</TABLE>
