<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 September 30, 1999
------------------
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)
United Stationers Inc.: Delaware United Stationers Inc.: 36-3141189
United Stationers United Stationers
Supply Co.: Illinois Supply Co.: 36-2431718
- -------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2200 East Golf Road, Des Plaines, Illinois 60016-1267
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
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 November 8, 1999, United Stationers Inc. had outstanding 33,989,609 shares of
Common Stock, par value $0.10 per share. On November 8, 1999, 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 SEPTEMBER 30, 1999
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
September 30, 1999 and December 31, 1998 3
Condensed Consolidated Statements of Income
for the Three and Nine Months ended September 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows
for the Nine Months ended September 30, 1999 and 1998 6
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
PART II - OTHER INFORMATION 20
- ---------------------------
SIGNATURE 21
INDEX TO EXHIBITS 22
</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 September 30, 1999, and the related
condensed consolidated statements of income for the three month and nine month
periods ended September 30, 1999 and 1998, and the condensed consolidated
statements of cash flows for the nine months period ended September 30, 1999 and
1998. 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, 1998, 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 26, 1999, except for Note 18, as to
which the date is March 17, 1999, 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, 1998,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
/s/Ernst & Young LLP
Chicago, Illinois
October 19, 1999,
except for Note 8, as to which the date is
October 21, 1999
- 2 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
September 30, December 31,
1999 1998
---------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,601 $ 19,038
Accounts receivable, net 257,419 203,467
Inventories 536,841 554,940
Other current assets 32,760 21,293
---------------- -------------
Total current assets 839,621 798,738
Property, plant and equipment, net 170,317 169,060
Goodwill, net 177,986 181,009
Other 18,355 18,184
---------------- -------------
Total assets $ 1,206,279 $ 1,166,991
---------------- -------------
---------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 346,043 $ 301,952
Accrued liabilities 146,952 132,053
Current maturities of long-term debt 8,462 7,709
---------------- -------------
Total current liabilities 501,457 441,714
Deferred income taxes 28,886 26,223
Long-term obligations 295,108 328,491
---------------- -------------
Total liabilities 825,451 796,428
Stockholders' equity:
Common stock, $0.10 par value, authorized 100,000,000 shares; issued
37,212,178 shares in 1999 and 36,912,173 shares in 1998 3,721 3,691
Additional paid-in capital 304,417 303,330
Treasury stock, at cost - 3,237,667 shares (49,410) --
Retained earnings 123,151 64,853
Accumulated translation adjustment (1,051) (1,311)
---------------- -------------
Total stockholders' equity 380,828 370,563
---------------- -------------
Total liabilities and stockholders' equity $ 1,206,279 $ 1,166,991
---------------- -------------
---------------- -------------
</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
September 30,
----------------------
1999 1998
--------- ----------
<S> <C> <C>
Net sales $877,802 $795,407
Cost of goods sold 733,752 659,132
--------- ----------
Gross profit 144,050 136,275
Operating expenses:
Warehousing, marketing and
administrative expenses 96,200 91,594
--------- ----------
Income from operations 47,850 44,681
Interest expense 6,853 7,348
Other expense 2,575 2,820
--------- ----------
Income before income taxes 38,422 34,513
Income taxes 16,129 14,634
--------- ----------
Net income $ 22,293 $ 19,879
--------- ----------
--------- ----------
Net income per common share $ 0.66 $ 0.54
--------- ----------
--------- ----------
Average number of common shares outstanding (in thousands) 33,970 36,749
Net income per common share - assuming dilution $ 0.65 $ 0.52
--------- ----------
--------- ----------
Average number of common shares outstanding - assuming
dilution (in thousands) 34,472 37,909
</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>
Nine Months Ended
September 30,
-----------------------------
1999 1998
------------ -------------
<S> <C> <C>
Net sales $ 2,502,816 $ 2,259,890
Cost of goods sold 2,096,609 1,874,663
------------ -------------
Gross profit 406,207 385,227
------------ -------------
Operating expenses:
Warehousing, marketing and
administrative expenses 276,713 264,210
Non-recurring charge -- 13,852
------------ -------------
Total operating expenses 276,713 278,062
------------ -------------
Income from operations 129,494 107,165
Interest expense 21,963 28,690
Other expense 7,032 5,206
------------ -------------
Income before income taxes and extraordinary item 100,499 73,269
Income taxes 42,201 31,070
------------ -------------
Income before extraordinary item 58,298 42,199
Extraordinary item, loss on early retirement of debt,
net of tax benefit of $3,971 -- (5,907)
------------ -------------
Net income $ 58,298 $ 36,292
------------ -------------
------------ -------------
Net income per common share:
Income before extraordinary item $ 1.67 $ 1.24
Extraordinary item -- (0.17)
------------ -------------
Net income per share $ 1.67 $ 1.07
------------ -------------
------------ -------------
Average number of common shares outstanding (in thousands) 34,952 33,930
Net income per common share - assuming dilution:
Income before extraordinary item $ 1.64 $ 1.19
Extraordinary item -- (0.17)
------------ -------------
Net income per share $ 1.64 $ 1.02
------------ -------------
------------ -------------
Average number of common shares outstanding - assuming
dilution (in thousands) 35,448 35,586
</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>
Nine Months Ended
September 30,
-------------------------
1999 1998
----------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 58,298 $ 36,292
Depreciation and amortization 21,614 20,554
Amortization of capitalized financing costs 1,339 1,730
Extraordinary item - early retirement of debt -- 9,877
Changes in operating assets and liabilities 9,748 242,683
----------- ----------
Net cash provided by operating activities 90,999 311,136
Cash Flows From Investing Activities:
Capital expenditures (21,641) (14,873)
Proceeds from disposition of property, plant
and equipment 3,260 36
Acquisition of Azerty, Inc. -- (115,740)
----------- ----------
Net cash used in investing activities (18,381) (130,577)
Cash Flows From Financing Activities:
Principal payments on debt (6,115) (548,603)
Borrowings under financing agreements -- 350,000
Net repayments under revolver (24,000) (46,000)
Issuance of common shares 2,656 99,001
Payment of employee withholding tax related to
stock option exercises (2,519) (16,525)
Financing costs -- (4,526)
Repurchase of common stock (49,600) --
Other 523 (1,335)
----------- ----------
Net cash used in financing activities (79,055) (167,988)
----------- ----------
Net change in cash and cash equivalents (6,437) 12,571
Cash and cash equivalents, beginning of period 19,038 12,367
----------- ----------
Cash and cash equivalents, end of period $ 12,601 $ 24,938
----------- ----------
----------- ----------
Other Cash Flow Information:
Income taxes paid $ 41,067 $ 20,302
Interest paid 22,106 23,104
</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, 1998. 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. Accordingly, the
reader of this Form 10-Q should refer to the Company's Form 10-K for the year
ended December 31, 1998 for further information. 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 operates in a single segment as the nation's largest wholesale
distributor of business products in North America. The Company offers
approximately 35,000 items from more than 500 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,
office products superstores, sanitary supply distributors, internet
providers, warehouse clubs, mail order houses and mass merchandisers. The
Company has a distribution network of 66 regional distribution centers.
Through its integrated mainframe systems, the Company provides a high level
of customer service and overnight delivery.
3. REPURCHASE OF COMMON STOCK
In the first quarter of 1999, the Company's Board of Directors authorized the
repurchase of up to $50.0 million in common stock. Under these
authorizations, the Company repurchased 3,250,000 shares of common stock at a
cost of approximately $49.6 million. Repurchased stock is included in the
authorized shares of the Company, but is not included in shares outstanding.
During the third quarter of 1999, the Company reissued 12,333 shares of
treasury stock to fulfill its obligation under its stock option plan.
-7-
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. COMPREHENSIVE INCOME (in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- --------------------------
1999 1998 1999 1998
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Net income $22,293 $19,879 $58,298 $36,292
Unrealized currency translation
adjustment (51) (817) 260 (1,331)
--------- --------- -------- --------
Comprehensive income $22,242 $19,062 $58,558 $34,961
--------- --------- -------- --------
--------- --------- -------- --------
</TABLE>
5. EARNINGS PER SHARE
Basic earnings per share ("EPS") is computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
EPS reflects the potential dilution that could occur if dilutive securities were
exercised into common stock. Stock options are considered dilutive securities.
For the three and nine months ended September 30, 1999, options to purchase
approximately two million shares of common stock at exercise prices ranging from
$22.00 to $33.63 were not included in the computation of diluted EPS because the
option exercise prices were higher than the average market price of the common
stock.
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 Nine Months Ended
September 30, September 30,
--------------------- -----------------------
1999 1998 1999 1998
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
NUMERATOR:
Income before extraordinary item $22,293 $19,879 $58,298 $42,199
Extraordinary item -- -- -- (5,907)
------- ------- ------- -------
Net income $22,293 $19,879 $58,298 $36,292
------- ------- ------- -------
------- ------- ------- -------
DENOMINATOR (in thousands):
Denominator for basic earnings per share -
Weighted average shares 33,970 36,749 34,952 33,930
Effect of dilutive securities:
Employee stock options 502 1,160 496 1,656
------- ------- ------- -------
Denominator for diluted earnings per share -
adjusted weighted average shares
and assumed conversions 34,472 37,909 35,448 35,586
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- 8 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1999 1998 1999 1998
------- ------ ------ ------
<S> <C> <C> <C> <C>
EARNINGS PER COMMON SHARE:
Basic
Income before extraordinary item $0.66 $0.54 $1.67 $1.24
Extraordinary item -- -- -- (0.17)
------ ------ ------ ------
Net income per share $0.66 $0.54 $1.67 $1.07
------ ------ ------ ------
------ ------ ------ ------
Diluted
Income before extraordinary item $0.65 $0.52 $1.64 $1.19
Extraordinary item -- -- -- (0.17)
------ ------ ------ ------
Net income per share $0.65 $0.52 $1.64 $1.02
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
6. SUMMARIZED FINANCIAL DATA FOR GUARANTOR SUBSIDIARIES
Azerty Incorporated, Positive ID Wholesale, and AP Support Services
(collectively, the "Azerty Guarantor") 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.
Summarized below is the combined financial data for the Azerty Business
(subsequent to its acquisition by USSC) and Lagasse. Summarized financial
data for the nine months ended September 30, 1999 reflects the operations of
Lagasse and the Azerty Business. Summarized financial data for the nine
months ended September 30, 1998 reflects the operations of Lagasse for nine
months and the Azerty Business, subsequent to its acquisition by USSC, for
the six months ended September 30, 1998.
<TABLE>
<CAPTION>
As of As of
September 30, December 31,
1999 1998
------------------- ---------------------
<S> <C> <C>
Balance Sheet Data:
Current assets $ 235,598 $ 175,745
Total assets 353,741 293,914
Current liabilities 114,158 90,498
Total liabilities 114,437 90,560
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------------- ------------------------------
1999 1998 1999 1998
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Income Statement Data:
Net sales $220,089 $ 132,154 $ 592,152 $ 280,527
Gross margin 21,587 14,626 58,942 32,631
Operating income 8,119 5,600 22,045 12,122
Net income 4,563 2,741 12,453 6,032
</TABLE>
- 9 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
7. RECENT ACCOUNTING PRONOUNCEMENT
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and for Hedging Activities". SFAS No. 133 requires all derivatives
to be recorded on the balance sheet at fair value and establishes "special
accounting" for the following three different types of hedges: hedges of changes
in the fair value of assets, liabilities or firm commitments; hedges of the
variable cash flows of forecasted transactions; and hedges of foreign currency
exposures of net investments in foreign operations. Though the accounting
treatment and criteria for each of the three types of hedges are unique, they
all result in recognizing offsetting changes in value or cash flows of both the
hedge and the hedged item in earnings in the same period. Changes in the fair
value of derivatives that do not meet the criteria of one of these three
categories of hedges are included in earnings in the period of the change. In
June 1999, the FASB issued SFAS No. 137 "Accounting for Derivative Instruments
and Hedging Activities - Deferral of the Effective Date of SFAS No. 133." SFAS
No. 137 delays the effective date of SFAS No. 133 to fiscal years beginning
after June 15, 2000. The Company will adopt the new statement beginning January
1, 2001. The Company anticipates that SFAS No. 133 will not have a material
impact on its consolidated financial statements.
8. SUBSEQUENT EVENT
On October 21, 1999, the Company announced that it had proposed a negotiated
purchase transaction with an all-cash price of $20.00 per share to the Board of
Directors of Daisytek International. The Daisytek Board rejected the Company's
proposal to negotiate and said that Daisytek intended to proceed with a
previously announced spin-off plan.
- 10 -
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Consolidated
Financial Statements and related notes appearing elsewhere in this Form 10-Q.
Information contained or incorporated by reference in this Form 10-Q may
contain "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act, which can be identified
by the use of forward-looking terminology such as "may," "will," "expect,"
"intend," "anticipate," "believe," "estimate" or "continue" or the negative
thereof or other variations thereon or comparable terminology. All statements
other than statements of historical fact included in this Form 10-Q,
including those regarding the Company's financial position, business
strategy, projected costs and plans and objectives of management for future
operations are forward-looking statements. The following matters and certain
other factors noted throughout this Form 10-Q constitute cautionary
statements identifying important factors with respect to any such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to differ materially from those in such
forward-looking statements. 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, the
effects on the Company of fluctuations in manufacturers' pricing, potential
service interruptions, dependence on key personnel 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
Registration Statement filed on June 9, 1998. All forward-looking statements
contained in this Form 10-Q and/or any subsequent written or oral
forward-looking statements attributable to the Company or persons acting on
behalf of the Company are expressly qualified in their entirety by such
cautionary statements. The Company undertakes no obligation to release the
results of any revisions to these forward-looking statements that may be made
to reflect any future events or circumstances.
THIRD QUARTER ENDED SEPTEMBER 30, 1999 COMPARED WITH THE
THIRD QUARTER ENDED SEPTEMBER 30, 1998
NET SALES. Net sales increased 10.4% to $877.8 million in the third quarter
of 1999 compared with $795.4 million in the third quarter of 1998. The
Company experienced sales growth in all product categories and across all
regions. Janitorial and sanitation products along with computer consumables
experienced strong growth in the quarter.
GROSS MARGIN. Gross margin declined to 16.4% in the third quarter of 1999,
compared with 17.1% in 1998. The strong growth in computer consumables and an
increased level of promotional activity contributed to the margin decline.
OPERATING EXPENSES. Operating expenses as a percent of net sales declined to
10.9% in 1999, compared with 11.5% in 1998. This reduction is due to a shift
in product mix toward computer consumables, efforts in controlling expenses
and leveraging of the infrastructure. Management believes that the Company
has significant opportunities to further reduce operating expenses as a
percentage of net sales. This goal can be achieved by adopting the best
practices from each of the Company's facilities and implementing them across
the distribution network.
- 11 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INCOME FROM OPERATIONS. Income from operations as a percent of net sales
declined to 5.5% in 1999, compared with 5.6% in 1998.
INTEREST EXPENSE. Interest expense as a percent of net sales was 0.8% in
1999, compared with 0.9% in 1998. This reduction reflects the Company's
strong cash flow generation, the continued leveraging of interest costs
against higher sales and the repayment of indebtedness with the proceeds
received from the June 1998 equity offering. These transactions were
partially offset by the $49.6 million of funding required to repurchase 3.3
million shares of the Company's common tsock and slightly higher interest
rates on variable rate debt.
OTHER EXPENSE. Other expense as a percent of net sales decreased to 0.3% in
1999, compared with 0.4% in 1998. This expense represents the costs
associated with the sale of certain trade accounts receivable through the
Receivables Securitization Program (as defined) and a loss of $0.2 million on
the sale of capital assets. Costs related to the Receivables Securitization
Program vary on a monthly basis and are generally related to certain interest
rates.
INCOME BEFORE TAXES. Income before taxes as a percent of net sales increased
to 4.4% in 1999 from 4.3% in 1998.
NET INCOME. Net income as a percent of net sales increased to 2.6% in 1999,
compared with 2.5% in 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH THE
NINE MONTHS ENDED SEPTEMBER 30, 1998
NET SALES. Net sales for the nine months ended September 1999 were $2.5
billion, an increase of 10.7% over net sales of $2.3 billion in 1998. The
increase reflects the impact of the Azerty acquisition, which closed on April
3, 1998, and strong third quarter sales of janitorial and sanitation products
along with computer consumables. Organic sales for the nine months ended
September 1999 increased by 6.1%.
GROSS MARGIN. Gross margin for the nine months ended September 1999 declined to
16.2%, compared with 17.1% in the same period last year. This decrease is
primarily the result of a higher percentage of lower-margin computer consumables
into the Company's overall margin mix. In addition, this reduction reflects an
increased level of promotional activity in the areas of cut-sheet paper sales,
toner cartridges and special orders.
OPERATING EXPENSES. Operating expenses as a percent of net sales declined to
11.0% in 1999 compared with 11.7%, excluding a non-recurring charge, in 1998.
The reduction in the operating expense ratio represents the blending of the
Azerty business, which operates at a lower expense ratio, into the Company's
overall expense ratio. In addition, the reduction in the operating expense ratio
reflects a shift in product mix toward lower cost-to-serve computer consumables,
the Company's efforts in controlling expenses, leveraging of the infrastructure
and continually improving warehouse and systems efficiencies to produce the
highest levels of customer and consumer satisfaction. Management believes that
the Company has significant opportunities to further reduce operating expenses.
- 12 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The non-recurring charge recorded in the second quarter of 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. Operating
expenses as a percent of net sales, including the aforementioned charges, was
12.3% in 1998.
INCOME FROM OPERATIONS. Income from operations as a percent of net sales
declined to 5.2% in 1999, compared with 5.4%, excluding the non-recurring
charge, in 1998. Including the non-recurring charge, income from operations as
a percent of net sales was 4.8% in 1998.
INTEREST EXPENSE. Interest expense as a percent of net sales was 0.9% in
1999, compared with 1.3% in 1998. This reduction reflects the Company's
strong cash flow generation, the continued leveraging of interest costs
against higher sales and the repayment of indebtedness with the proceeds
received from the June 1998 equity offering, and the Receivables
Securitization Program. These transactions were partially offset by the
acquisition of Azerty, in April of 1998, for a purchase price of
approximately $115.7 million, the placement of $100.0 million of Senior
Subordinated Notes at 8.375% (as defined) in April of 1998, the $49.6 million
of funding required to repurchase 3.3 million shares of the Company's common
stock and slightly higher interest rates on variable rate debt.
OTHER EXPENSE. Other expense as a percent of net sales was 0.3% in 1999,
compared with 0.2% in 1998. This expense represents the costs associated with
the sale of certain trade accounts receivable through the Receivables
Securitization Program and a loss of $0.2 million on the sale of capital
assets. Costs related to the Receivables Securitization Program vary on a
monthly basis and are generally related to certain interest rates.
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY ITEM. Income before income taxes
and extraordinary item as a percent of net sales increased to 4.0% in
1999, from 3.9% in 1998, excluding the non-recurring charge. Including the
non-recurring charge, income before income taxes and extraordinary item as a
percent of net sales was 3.3% in 1998.
NET INCOME. Net income as a percent of sales increased to 2.3% in 1999,
compared with 2.2%, excluding the non-recurring charge and extraordinary
item, in 1998. Including the non-recurring charge and extraordinary item, net
income as a percent of sales was 1.6% in 1998.
- 13 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Credit Agreement
At September 30, 1999, the available credit under the Second Amended and
Restated Credit Agreement (the "Credit Agreement") included $55.3 million of
term loan borrowings (the "Term Loan Facilities"), and up to $250.0 million
of revolving loan borrowings (the "Revolving Credit Facility"). In addition,
the Company has $100.0 million of 12.75% Senior Subordinated Notes due 2005
(as defined), $100.0 million of 8.375% Senior Subordinated Notes due 2008 and
$29.8 million of industrial revenue bonds.
The Term Loan Facilities consist of a $55.3 million Tranche A term loan facility
("Tranche A Facility"). Amounts outstanding under the Tranche A Facility are to
be repaid in 18 quarterly installments ranging from $1.6 million at December 31,
1999 to $3.7 million at March 31, 2004.
The Revolving Credit Facility is limited to $250.0 million, less the
aggregate amount of letter of credit liabilities, and contains a provision
for swingline loans in an aggregate amount up to $25.0 million. The Revolving
Credit Facility had no outstanding balance as of September 30, 1999. The
Revolving Credit Facility matures on March 31, 2004.
The Term Loan Facilities and the Revolving Credit Facility are secured by
first priority pledges of the stock of USSC, all of the stock of domestic
direct and indirect subsidiaries of USSC, certain of the stock of Lagasse and
Azerty, and certain of the foreign and direct and indirect subsidiaries of
USSC (excluding USS Receivables Company, Ltd.) and security interests and
liens upon all accounts receivable, inventory, contract rights and certain
real property of USSC and its domestic subsidiaries other than accounts
receivables sold in connection with the Receivables Securitization Program.
The loans outstanding under the Term Loan Facilities and the Revolving Credit
Facility bear interest as determined within a set range, with the rate based
on the ratio of total debt to earnings before interest, taxes, depreciation,
and amortization ("EBITDA"). The Tranche A Facility and Revolving Credit
Facility bear interest at prime to prime plus 0.75%, or, at the Company's
option, the London Interbank Offering Rate ("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. At September 30, 1999, the Company was in compliance with all covenants
contained in the Credit Agreement.
- 14 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company is exposed to market risk for changes in interest rates. The
Company may enter into interest rate protection agreements, including collar
agreements, to reduce the impact of fluctuations in interest rates on a
portion of its variable rate debt. These agreements generally require the
Company to pay to or entitle the Company to receive from the other party the
amount, if any, by which the Company's interest payments fluctuate beyond the
rates specified in the agreements. The Company is subject to the credit risk
that the other party may fail to perform under such agreements. The Company's
allocated cost of such agreements is amortized to interest expense over the
term of the agreements, and the unamortized cost is included in other assets.
Payments received or made as a result of the agreements, if any, are recorded
as a reduction or an addition to interest expense. At September 30, 1999, the
Company had interest rate collar agreements expiring October 1999 on $200.0
million of borrowings at LIBOR rates between 5.2% and 8.0%. For the three and
nine month periods ended September 30, 1999 and 1998, the Company recorded
$21,111, $215,016, zero and $211,415, respectively, to interest expense
resulting from LIBOR rate fluctuations below the floor rate specified in the
collar agreements.
The right of United to participate in any distribution of earnings or assets
of USSC is subject to the prior claims of the creditors of USSC. In addition,
the Credit Agreement contains certain restrictive covenants, including
covenants that restrict or prohibit USSC's ability to pay cash dividends and
make other distributions to United.
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 12 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 Credit Agreement and the indentures governing the
Notes contain restrictions on the ability of USSC to transfer cash to United.
12.75% Senior Subordinated Notes
The 12.75% Senior Subordinated Notes ("12.75% Notes") originally were issued
on May 3, 1995, pursuant to the 12.75% Notes Indenture. As of September 30,
1999, the aggregate outstanding principal amount of the 12.75% Notes was
$100.0 million. The 12.75% Notes are unsecured senior subordinated
obligations of USSC, and payment of the 12.75% Notes is fully and
unconditionally guaranteed by the Company and USSC's domestic "restricted"
subsidiaries on a senior subordinated basis. The 12.75% Notes mature on May
1, 2005, and bear interest at the rate of 12.75% per annum, payable
semi-annually on May 1 and November 1 of each year.
- 15 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
8.375% Senior Subordinated Notes
The 8.375% Senior Subordinated Notes ("8.375% Notes") were issued on April
15, 1998, pursuant to the 8.375% Notes Indenture. As of September 30, 1999,
the aggregate outstanding principal amount of 8.375% Notes was $100.0
million. The 8.375% Notes are unsecured senior subordinated obligations of
USSC, and payment of the 8.375% Notes is fully and unconditionally guaranteed
by the Company and USSC's domestic "restricted" subsidiaries that incur
indebtedness on a senior subordinated basis. The 8.375% Notes mature on April
15, 2008, and bear interest at the rate of 8.375% per annum, payable
semi-annually on April 15 and October 15 of each year.
Receivables Securitization Program
On April 3, 1998, in connection with the refinancing of its credit
facilities, the Company entered into a $163.0 million 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 existed on the closing date of the
Receivables Securitization Program, but also eligible receivables created
thereafter. The Company received approximately $160.0 million in proceeds
from the initial sale of certain eligible receivables on April 3, 1998. These
proceeds were used to repay certain indebtedness outstanding on April 3,
1998. Costs related to this facility vary on a monthly basis and generally
are related to certain interest rates. These costs are included in the
Consolidated Statements of Income under the caption Other Expense.
The Chase Manhattan Bank acts as funding agent and, 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 under a 364-day
liquidity facility. 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. As a result of the Receivables Securitization
Program, the balance sheet assets of the Company as of September 30, 1999,
exclude approximately $160.0 million of accounts receivable sold to the
Receivables Company.
- 16 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The statements of cash flows for the Company for the periods indicated are
summarized below:
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-------------------------------
1999 1998
------- --------
(dollars in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 90,999 $ 311,136
Net cash used in investing activities (18,381) (130,577)
Net cash used in financing activities (79,055) (167,988)
</TABLE>
Net cash provided by operating activities for the nine months ended September
30, 1999 decreased to $91.0 million from $311.1 million in the comparable
prior year period. This decrease was primarily due to the initial sale of
$160.0 million of certain accounts receivable in 1998, an increase in
accounts receivable of $54.0 million during 1999, compared with a decline of
$20.4 million (excluding the sale of certain accounts receivable) in the
prior period.
Net cash used in investing activities for the nine months ended September 30,
1999 was $18.4 million compared with $130.6 million used in the prior period.
The cash used in investing activities in 1998 included the acquisition of the
Azerty businesses for $115.7 million. Capital expenditures for the nine
months ended September 30, 1999 totaled $21.6 million compared with $14.9
million in the same period last year.
Net cash used in financing activities for the nine months ended September 30,
1999 was $79.1 million compared with $168.0 million in the prior period. This
decrease was due primarily to lower debt principal payments (due to the
elimination of the excess cash flow payment required by the credit agreement
in 1998) partially offset by the repurchase of $49.6 million in common stock
and fewer proceeds from the issuance of common stock.
Year 2000 Modifications
In 1996, the Company began to address the year 2000 issue (that is, the fact
that some systems may fail or produce inaccurate results using dates in or
around the year 2000). The Company formed a year 2000 task force under its
Chief Information Officer to coordinate and implement measures designed to
prevent disruption in its business operations related to the year 2000 issue.
The Company believes that it has completed its planned remediation and
testing of its Information Technology ("IT") systems. The Company has
assessed the effect of the year 2000 issue on its non-IT systems and is in
the process of upgrading or replacing its non-IT systems as necessary to be
year 2000 ready by December 31, 1999.
The Company has made inquiries of its suppliers with respect to their year
2000 readiness. Over 90% of the Company's suppliers (measured by purchase
dollar volume) have indicated that they expect to be year 2000 ready before
December 31, 1999. The Company is in the process of confirming that its
suppliers have completed these plans. Beginning with the Company's catalog
for 1999, the Company's product suppliers have assured the Company that their
products are year 2000 ready. However, the Company does not control its
suppliers and relies on a variety of utilities, telecommunications companies
and other suppliers in order to continue its business.
- 17 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company has worked to identify certain key risks to the Company as a
result of the year 2000 issue. Those identified risks fall into the following
categories: (1) failures of suppliers or transportation carriers; (2)
failures of customers' information systems; (3) failures of the Company's IT
and non-IT systems; and (4) year 2000 related shortages, stockpiling by
customers to avoid year 2000 shortages, and returns of stockpiled materials
early in 2000. While all risks cannot be avoided, the Company has developed a
contingency plan, which includes among other things building inventory and
building its network of alternative suppliers. The Company's contingency plan
also describes action plans, responsible units, contact lists, and other
procedures to be used if selected adverse events occur.
The Company's year 2000 remediation utilizes both internal and external
resources. During 1998 and 1997, the Company incurred approximately $1.5
million and $1.4 million, respectively, related to this issue. For the nine
months ended September 30, 1999, the Company incurred approximately $1.0
million and expects to incur an additional $0.3 million to $0.5 million of
year 2000 remediation expenses during the balance of the year. Funding for
year 2000 expenses will be generated from ongoing operations and available
borrowings under the Credit Agreement.
There can be no assurance that year 2000 remediation and testing by the
Company or third parties has been or will be successfully completed. In
addition, we cannot predict the actual effects of the year 2000 issue, which
depend on numerous uncertainties, and there can be no assurance that the year
2000 issue will not result in broad-based or systemic problems. Any such
failures or problems could have a material adverse effect on the Company's
results of operations or financial condition.
Quantitative and Qualitative Disclosure About Market Risk
The Company is subject to market risk associated principally with changes in
interest rates and foreign currency exchange rates. Interest rate exposure is
principally limited to the Company's outstanding long-term debt at September
30, 1999, of $285.3 million and $160.0 million of receivables sold under the
Receivables Securitization Program, whose discount rate varies with market
interest rates ("Receivables Exposure"). Approximately 45% of the outstanding
debt and Receivables Exposure are priced at interest rates that are fixed.
The remaining debt and Receivables Exposure is priced at interest rates that
float with the market. A 50 basis point movement in interest rates would
result in an approximate $1.2 million annualized increase or decrease in
interest expense, loss on the sale of certain accounts receivable and cash
flows.
The Company will from time to time enter into interest rate swaps or collars
on its debt. The Company does not use derivative financial or commodity
instruments for trading purposes. Typically, the use of such derivative
instruments is limited to interest rate swaps or collars on the Company's
outstanding long-term debt. The Company's exposure related to such derivative
instruments is, in the aggregate, not material to the Company's financial
position, results of operations and cash flows.
- 18 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Company's foreign currency exchange rate risk is limited principally to
the Mexican Peso, Canadian Dollar, Italian Lira, as well as product purchases
from Asian countries currently paid in U.S. dollars. Many of the products
which the Company sells in Mexico and Canada are purchased in U.S. dollars
while the sale is invoiced in the local currency. The Company's foreign
currency exchange rate risk is not material to the Company's financial
position, results of operations and cash flows. The Company has not
previously hedged these transactions, but is considering such a program, and
may enter into such transactions when it believes there is a clear financial
advantage to do so.
- 19 -
<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
Not applicable
ITEM 5 OTHER INFORMATION
Subsequent Event
On October 21, 1999, the Company announced that it had
proposed a negotiated purchase transaction with an all-cash
price of $20.00 per share to the Board of Directors of
Daisytek International. The Daisytek Board rejected the
Company's proposal to negotiate and said that Daisytek
intended to proceed with a previously announced spin-off plan.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit
Number
------
2 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.
27.2 Financial Data Schedule - United Stationers Supply Co.
99 Not applicable
- 20 -
<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: November 8, 1999 /s/ Daniel H. Bushell
--------------------- -------------------------------------
Daniel H. Bushell
Executive Vice President,
Chief Development Officer
and Chief Financial Officer
- 21 -
<PAGE>
UNITED STATIONERS INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
(a) Exhibit
Number
------
2 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.
27.2 Financial Data Schedule - United Stationers Supply Co.
99 Not applicable
- 22 -
<PAGE>
Exhibit 15.1
November 9, 1999
The Board of Directors
United Stationers Inc.
We are aware of the incorporation by reference in the Registration Statement on
Form S-8 of United Stationers Inc. for the registration of 8,200,000 shares of
its common stock of our report dated October 19, 1999, except for Note 8, as to
which the date is October 21, 1999, 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 September 30, 1999.
/s/ Ernst & Young LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000355999
<NAME> UNITED STATIONERS INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 12,601 12,601
<SECURITIES> 0 0
<RECEIVABLES> 270,025 270,025
<ALLOWANCES> 12,607 12,607
<INVENTORY> 536,841 536,841
<CURRENT-ASSETS> 839,621 839,621
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,206,279 1,206,279
<CURRENT-LIABILITIES> 501,457 501,457
<BONDS> 0 0
0 0
0 0
<COMMON> 3,721 3,721
<OTHER-SE> 377,107 377,107
<TOTAL-LIABILITY-AND-EQUITY> 1,206,279 1,206,279
<SALES> 877,802 2,502,816
<TOTAL-REVENUES> 877,802 2,502,816
<CGS> 733,752 2,096,609
<TOTAL-COSTS> 733,752 2,096,609
<OTHER-EXPENSES> 98,775 283,745
<LOSS-PROVISION> 2,177 5,526
<INTEREST-EXPENSE> 6,853 21,963
<INCOME-PRETAX> 38,422 100,499
<INCOME-TAX> 16,129 42,201
<INCOME-CONTINUING> 22,293 58,298
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,293 58,298
<EPS-BASIC> 0.66 1.67
<EPS-DILUTED> 0.65 1.64
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000945633
<NAME> UNITED STATIONERS SUPPLY CO
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1999
<PERIOD-START> JUL-01-1999 JAN-01-1999
<PERIOD-END> SEP-30-1999 SEP-30-1999
<EXCHANGE-RATE> 1 1
<CASH> 12,601 12,601
<SECURITIES> 0 0
<RECEIVABLES> 270,025 270,025
<ALLOWANCES> 12,607 12,607
<INVENTORY> 536,841 536,841
<CURRENT-ASSETS> 839,621 839,621
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 1,206,279 1,206,279
<CURRENT-LIABILITIES> 501,457 501,457
<BONDS> 0 0
0 0
0 0
<COMMON> 3,721 3,721
<OTHER-SE> 377,107 377,107
<TOTAL-LIABILITY-AND-EQUITY> 1,206,279 1,206,279
<SALES> 877,802 2,502,816
<TOTAL-REVENUES> 877,802 2,502,816
<CGS> 733,752 2,096,609
<TOTAL-COSTS> 733,752 2,096,609
<OTHER-EXPENSES> 98,775 283,745
<LOSS-PROVISION> 2,177 5,526
<INTEREST-EXPENSE> 6,853 21,963
<INCOME-PRETAX> 38,422 100,499
<INCOME-TAX> 16,129 42,201
<INCOME-CONTINUING> 22,293 58,298
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 22,293 58,298
<EPS-BASIC> 0.66 1.67
<EPS-DILUTED> 0.65 1.64
</TABLE>
