UNITED STATIONERS INC. DEERFIELD, Ill., April 22, 2015 /PRNewswire/ -- United Stationers Inc. (NASDAQ: USTR), a leading supplier of workplace essentials, today announced financial results for the first quarter ended March 31, 2015.
Overview
-- Sales increased 6.2% to $1.33 billion when compared to the first quarter
of last year driven by prior year acquisitions.
-- Gross margin was $204.4 million, or 15.3 percent of sales, up from 14.9
percent in the prior year quarter.
-- Operating expenses were $198.4 million, including $30.5 million related
to the previously announced repositioning actions. Adjusted operating
expenses((1) )were $167.9 million, or 12.6 percent of sales, up from
$148.8 million or 11.9 percent of sales in the prior year quarter.
-- Net loss per share was $0.10 in the current quarter, including $0.62 per
share related to repositioning actions. Adjusted earnings per share were
$0.52((1) )compared to earnings per share of $0.55 in the prior year
quarter.
-- Cash flow provided by operating activities was $62.7 million, up from
$1.5 million in the prior year.
"Our results reflect solid execution of our strategy despite a decline in our core industrial business from weakness in the energy sector," said Cody Phipps, president and chief executive officer. "This quarter we took decisive actions to maximize future operating results and deliver enhanced customer service in the years ahead. We are investing in a common operating and information technology platform, consolidating our workforce and facilities, rebranding the company to Essendant across our businesses, and exiting a non-strategic and low margin business. These actions are consistent with our strategy to become the fastest and most convenient solution for workplace essentials. I remain confident these actions will accelerate our operating performance, position us for success in the market, and benefit our shareholders."
(1) This is non-GAAP information. See
the Reconciliation of Non-GAAP
Financial Measures section of
this document for more
information.
Note: All EPS numbers in this
document are diluted unless
stated otherwise.
First Quarter Performance
First quarter 2015 sales increased 6.2%, driven by prior year acquisitions. The current quarter gross margin was 15.3 percent of sales, up from 14.9 percent of sales in the first quarter of 2014.
-- Sales of industrial supplies increased 57.2 percent to $210.3 million,
including $90.2 million from the CPO and MEDCO acquisitions made in
2014. Weakness in the energy and industrial sectors drove a $13.7
million sales decline in the core industrial business. Janitorial and
breakroom supplies sales increased 8.3 percent to $357.7 million from
$330.3 million. Total office products sales were down 3.5 percent to
$727.3 million from $753.6 million.
-- The gross margin rate of 15.3 percent included a favorable 40 basis
points from acquisitions. Excluding acquisitions, gross margin remained
flat on improved product margin offset by higher LIFO expense.
-- Adjusted operating expenses((1) )were $167.9 million or 12.6 percent of
sales, compared to $148.8 million, or 11.9 percent of sales, in the
prior year quarter. The $19.1 million increase was driven by $17.5
million from acquisitions and $1.6 million from operating investments.
-- Adjusted operating income((1) )was $36.5 million, or 2.7 percent of
sales, down from $38.2 million, or 3.0 percent of sales, in the prior
year quarter.
-- Net loss was $4.0 million, including $23.9 million of after-tax costs
related to repositioning actions. Adjusted net income((1) )was $19.9
million compared to $21.9 million in the prior year quarter. The current
quarter effective tax rate increased due to unfavorable discrete items
in the quarter related to listing a non-strategic business for sale.
Adjusted earnings per share were $0.52((1)), compared to $0.55 in the
first quarter of 2014.
Cash Flow, Debt Trends and Share Repurchases
Net cash provided by operating activities for the period ended March 31, 2015 was $62.7 million, compared with $1.5 million for the same period last year. The increase over the prior year was driven by lower accounts receivable balances and improved changes in accounts payable and accrued liabilities. Cash flow used in investing activities totaled $5.5 million in 2015, compared with $5.9 million last year. The company estimates the 2015 full-year total capital expenditures to be $30 million to $35 million.
The company has approximately $1.0 billion of total committed debt capacity. As of March 31, 2015, the company had total debt outstanding of $684.3 million compared with $562.5 million as of March 31, 2014. Debt-to-total capitalization increased to 45.2 percent at March 31, 2015 from 40.4 percent at March 31, 2014 due to the acquisition of MEDCO in the fourth quarter of 2014. In the first quarter of 2015, the company paid $16.0 million to acquire approximately 0.4 million shares and paid cash dividends of $5.4 million to common shareholders.
Repositioning for Sustained Success
As previously announced in February, the company is taking decisive actions to reposition the business, provide enhanced customer service, and create sustained long-term success. These actions are as follows:
-- During 2015 the company will invest an incremental $15.0 million to move
to a common operating/information technology platform that will simplify
the customer experience and deliver operating cost savings. In the first
quarter the company invested $1.0 million. Total cost savings from this
initiative are expected to be $5.0 to $10.0 million in the second half
of 2016, and $15.0 to $20.0 million on an annual basis thereafter.
-- In the first quarter the company recorded the following pre-tax charges:
-- Workforce and facility consolidations of $6.4 million. Additional
actions will occur later in 2015 for a full year pre-tax charge of
approximately $9.0 million. The company expects these actions to
drive savings of $6.0 million in 2015 and $10.0 million annually,
beginning in 2016
-- Non-cash impairment of intangibles and accelerated amortization
related to rebranding efforts totaling $10.5 million. The company
expects a total charge of $12.0 million for the full year;
-- Non-cash charge of $13.6 million related to listing a non-strategic
business for sale. Additional impacts of this sale are expected
during 2015 related to transaction costs and foreign exchange
volatility.
Conference Call
United Stationers will hold a conference call followed by a question and answer session on Thursday, April 23, 2015, at 7:30 a.m. CDT, to discuss first quarter 2015 results. To participate, callers within the U.S. should dial (877) 358-2531, callers within Canada should dial (855) 669-9657, and international callers should dial (412) 902-6623 approximately 10 minutes before the presentation. The conference ID is "10063085." To listen to the webcast, participants should visit the Investors section of the company's website (link: http://investors.unitedstationers.com), and click on the "Q1-15 Earnings Release" button on the right side of the page, several minutes before the event is broadcast. Interested parties can access an archived version of the call, this news release, a financial slide presentation and other information related to the call, also located on the Investors section of United Stationers' website, about two hours after the call ends.
Forward-Looking Statements
This news release contains forward-looking statements, including references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature. These statements are based on management's current expectations, forecasts and assumptions. This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here. These risks and uncertainties include, but are not limited to the following: end-user demand for products in the office, technology, and furniture product categories may continue to decline; United's reliance on key customers, and the risks inherent in continuing or increased customer concentration and consolidations; prevailing economic conditions and changes affecting the business products industry and the general economy; United's ability to effectively manage its operations and to implement growth, cost-reduction and margin-enhancement initiatives; the impact of United's repositioning, restructuring and rebranding activities on United's customers, suppliers, and operations; United's reliance on supplier allowances and promotional incentives; United's reliance on independent resellers for a significant percentage of its net sales and, therefore, the importance of the continued independence, viability and success of these resellers; continuing or increasing competitive activity and pricing pressures within existing or expanded product categories, including competition from product manufacturers who sell directly to United's customers; the impact of supply chain disruptions or changes in key suppliers' distribution strategies; United's ability to maintain its existing information technology systems and the systems and e-commerce services that it provides to customers, and to successfully procure, develop and implement new systems and services without business disruption or other unanticipated difficulties or costs; the creditworthiness of United's customers; United's ability to manage inventory in order to maximize sales and supplier allowances while minimizing excess and obsolete inventory; United's success in effectively identifying, consummating and integrating acquisitions; the risks and expense associated with United's obligations to maintain the security of private information provided by United's customers; the costs and risks related to compliance with laws, regulations and industry standards affecting United's business; the availability of financing sources to meet United's business needs; United's reliance on key management personnel, both in day-to-day operations and in execution of new business initiatives; and the effects of hurricanes, acts of terrorism and other natural or man-made disruptions.
Shareholders, potential investors and other readers are urged to consider these risks and uncertainties in evaluating forward-looking statements and are cautioned not to place undue reliance on the forward-looking statements. For additional information about risks and uncertainties that could materially affect United's results, please see the company's Securities and Exchange Commission filings. The forward-looking information in this news release is made as of this date only, and the company does not undertake to update any forward-looking statement. Investors are advised to consult any further disclosure by United regarding the matters discussed in this release in its filings with the Securities and Exchange Commission and in other written statements it makes from time to time. It is not possible to anticipate or foresee all risks and uncertainties, and investors should not consider any list of risks and uncertainties to be exhaustive or complete.
Company Overview
United Stationers Inc. is a leading supplier of workplace essentials, with 2014 net sales of $5.3 billion. The company stocks a broad assortment of over 160,000 items, including technology products, traditional office products, janitorial and breakroom supplies, office furniture, industrial supplies, and automotive aftermarket tools. The Company's network of 77 distribution centers allows it to deliver these products to approximately 30,000 reseller customers. One of the Company's wholly owned subsidiaries is an online retailer which sells direct to end consumers. This network, combined with United's breadth and depth of inventory, enables the Company to ship most products overnight to more than ninety percent of the U.S. and major cities in Mexico and Canada. For more information, visit unitedstationers.com.
United Stationers common stock trades on the NASDAQ Global Select Market under the symbol USTR.
In June 2015 United Stationers will become Essendant Inc. and will trade on the NASDAQ Global Select Market under the symbol ESND.
United Stationers Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(in thousands, except per share data)
For the Three Months Ended
March 31,
---------
2015 2014
---- ----
Net sales $1,332,375 $1,254,139
Cost of goods sold 1,127,925 1,067,056
--------- ---------
Gross profit 204,450 187,083
Operating expenses:
Warehousing, marketing and
administrative expenses 198,372 148,849
------- -------
Operating income 6,078 38,234
Interest expense, net 4,839 3,374
----- -----
Income before income taxes 1,239 34,860
Income tax expense 5,231 13,003
----- ------
Net (loss) income $(3,992) $21,857
======= =======
Net (loss) income
per share -
basic: $(0.10) $0.56
====== =====
Average number of common
shares outstanding -basic 38,115 39,194
Net (loss) income
per share -
diluted: $(0.10) $0.55
====== =====
Average number of common
shares outstanding -
diluted 38,534 39,655
Dividends
declared per
share $0.14 $0.14
===== =====
United Stationers Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(dollars in thousands, except share data)
(Unaudited) (Audited)
---------- --------
As of March 31, As of December 31,
2015 2014
---- ----
ASSETS
Current assets:
Cash and cash equivalents $23,631 $20,812
Accounts receivable, less allowance for doubtful accounts of $18,043
in 2015 and $19,725 in 2014 665,426 702,527
Inventories 871,310 926,809
Assets held for sale 15,799 -
Other current assets 31,226 30,042
------ ------
Total current assets 1,607,392 1,680,190
Property, plant and equipment, net 133,640 138,217
Goodwill 394,186 398,042
Intangible assets, net 96,797 111,958
Other long-term assets 49,440 41,810
------ ------
Total assets $2,281,455 $2,370,217
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $467,657 $485,241
Accrued liabilities 175,770 192,792
Liabilities held for sale 6,956 -
Current maturities of long-term debt 41 851
--- ---
Total current liabilities 650,424 678,884
Deferred income taxes 13,985 17,763
Long-term debt 684,238 713,058
Other long-term liabilities 104,413 104,394
------- -------
Total liabilities 1,453,060 1,514,099
Stockholders' equity:
Common stock, $0.10 par value; authorized -100,000,000 shares, issued
-74,435,628 shares in 2015 and 2014 7,444 7,444
Additional paid-in capital 413,546 412,291
Treasury stock, at cost - 36,089,975 shares in 2015 and 35,719,041
shares in 2014 (1,057,955) (1,042,501)
Retained earnings 1,532,325 1,541,675
Accumulated other comprehensive loss (66,965) (62,791)
------- -------
Total stockholders' equity 828,395 856,118
------- -------
Total liabilities and stockholders' equity $2,281,455 $2,370,217
========== ==========
United Stationers Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
For the Three Months Ended
March 31,
---------
2015 2014
---- ----
Cash Flows From Operating Activities:
Net (loss) income $(3,992) $21,857
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization 12,223 9,523
Share-based compensation 2,640 3,225
Gain on the disposition of property, plant and equipment (15) (4)
Amortization of capitalized financing costs 272 287
Excess tax benefits related to share-based compensation (262) (494)
Asset impairment charges 23,610 -
Deferred income taxes (1,858) (2,450)
Changes in operating assets and liabilities (net of acquisitions):
Decrease (increase) in accounts receivable, net 26,217 (15,583)
Decrease in inventory 42,759 81,714
Increase in other assets (10,126) (1,041)
Increase (decrease) in accounts payable 645 (47,191)
Decrease in checks in-transit (13,613) (31,751)
Decrease in accrued liabilities (16,521) (13,654)
Increase (decrease) in other liabilities 743 (2,948)
--- ------
Net cash provided by operating activities 62,722 1,490
Cash Flows From Investing Activities:
Capital expenditures (5,490) (6,390)
Proceeds from the disposition of property, plant and equipment 18 458
--- ---
Net cash used in investing activities (5,472) (5,932)
Cash Flows From Financing Activities:
Net (repayments) borrowings under revolving credit facility (29,630) 4,562
Borrowings under Receivables Securitization Program - 9,300
Repayment of debt - (135,000)
Proceeds from the issuance of debt - 150,000
Net disbursements from share-based compensation arrangements (875) (1,704)
Acquisition of treasury stock, at cost (16,028) (12,491)
Payment of cash dividends (5,396) (5,509)
Excess tax benefits related to share-based compensation 262 494
Payment of debt issuance costs (36) (605)
--- ----
Net cash (used in) provided by financing activities (51,703) 9,047
Effect of exchange rate changes on cash and cash equivalents (1,758) 33
Transfer of cash to held for sale (970) -
---- ---
Net change in cash and cash equivalents 2,819 4,638
Cash and cash equivalents, beginning of period 20,812 22,326
------ ------
Cash and cash equivalents, end of period $23,631 $26,964
======= =======
United Stationers Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures
Adjusted Operating Income, Net Income, and Diluted Earnings Per Share
(unaudited)
(in thousands, except per share data)
For the Three Months Ended March 31,
------------------------------------
2015 2014
---- ----
% to % to
Amount Net Sales Amount Net Sales
------ --------- ------ ---------
Net Sales $1,332,375 100.0% $1,254,139 100.0%
========== ===== ========== =====
Gross profit $204,450 15.3% $187,083 14.9%
Operating expenses $198,372 14.9% $148,849 11.9%
Workforce reduction and facility consolidation
charge (6,433) (0.5%) - -
Rebranding -intangible asset impairment and
amortization (10,462) (0.8%) - -
Asset held for sale impairment (13,566) (1.0%) - -
------- ----- --- ---
Adjusted operating expenses $167,911 12.6% $148,849 11.9%
======== ==== ======== ====
Operating income $6,078 0.5% $38,234 3.0%
Operating expense items noted above 30,461 2.3% - -
------ --- --- ---
Adjusted operating income $36,539 2.7% $38,234 3.0%
======= === ======= ===
Net (loss) income $(3,992) $21,857
Operating expense items noted above, net of tax 23,896 -
------ ---
Adjusted net income $19,904 $21,857
======= =======
Diluted (loss) earnings per share $(0.10) $0.55
Per share operating expense items noted above 0.62 -
---- ---
Adjusted diluted earnings per share $0.52 $0.55
===== =====
Adjusted diluted earnings per share -change over
the prior year period (5.5%)
Weighted average number of common shares -
diluted 38,534 39,655
Note: Adjusted Operating Expenses, Adjusted Operating Income, Adjusted Net Income and Adjusted Earnings per Share in the first quarter of 2015 exclude the effects of a $6.4 million workforce reduction and facility consolidation charge, $10.5 million intangible asset charge and accelerated amortization related to rebranding, and $13.6 million impairment charge related to listing a non-strategic business for sale. Generally Accepted Accounting Principles require that the effects of these items be included in the Condensed Consolidated Statements of Income. Management believes that excluding these items is an appropriate comparison of its ongoing operating results and to the results of the prior year. It is helpful to provide readers of its financial statements with a reconciliation of these items to its Condensed Consolidated Statements of Income reported in accordance with Generally Accepted Accounting Principles.
For Further Information Contact:
Cody Phipps
President and Chief Executive Officer
or
Todd Shelton
Senior Vice President and Chief Financial Officer
United Stationers Inc.
(847) 627-7000
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SOURCE United Stationers
