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United Stationers Reports Strong Second Quarter 2011 Results

27 Jul, 2011

United Stationers Reports Strong Second Quarter 2011 Results


DEERFIELD, IL -July 2011--United Stationers Inc. reported second quarter 2011 results which included the following:

  • Net sales were up 2.9% to $1.26 billion compared with $1.22 billion in the prior-year quarter.    

  • Diluted earnings per share were $0.54 versus $0.55 in the prior-year quarter. Excluding non-cash items described below, adjusted earnings per share were $0.59 (1), up 16% compared with $0.51(1) in the prior-year period. More information on these non-cash items is presented at the end of   this news release.     

  • Second quarter gross margin was $184.2 million, or 14.7% of sales, compared with $179.2 million, or 14.7% of sales, in the prior-year quarter.        

  • Operating expenses were $136.4 million, or 10.9% of sales, compared with $128.9 million, or 10.6% of sales in the prior-year quarter.    

  • Excluding the non-cash items, second quarter 2011 adjusted operating expenses were $132.0 million(1) or 10.5%(1) of sales, compared with $131.7     million(1) or 10.8%(1) of sales.    

  • Operating margin was $47.8 million, or 3.8% of sales, versus $50.3 million, or 4.1% of sales, in the prior-year quarter. Excluding the non-cash     items, adjusted operating margin was up 9.8% to $52.2 million(1) or 4.2%(1) of sales, compared with $47.6 million(1) or 3.9%(1) of sales.

  • Net income was $24.8 million compared with $27.0 million in the prior-year quarter. 

  • Excluding the non-cash items, adjusted net income was up 8.7% to $27.5 million(1), compared with $25.3 million(1). Net cash provided by operating activities for the six months ended June 30, 2011 totaled $73.3 million versus $54.7 million in the prior-year period.    

  • Cash paid for share repurchases totaled $69.9 million for approximately 2.1 million shares during the six months ended June 30, 2011. On July 14, 2011, the company’s board of directors approved and authorized the purchase of up to an additional $100 million of common stock. In addition, the board of directors approved a quarterly cash dividend of $0.13 per share payable on October 14, 2011 to stockholders of record as of the close of business on September 15, 2011.

“While we experienced strong results from our growth strategies, we felt the same economic headwinds, including lingering unemployment, as many others and saw a deceleration in our overall growth rate during the quarter,” said Cody Phipps, president and chief executive officer. “We made progress towards our long-term operating margin expansion goals while investing in important skills and systems to support our strategies. Working capital discipline enabled solid cash flow and a strong financial position to fund our capital deployment priorities including growth initiatives, share repurchases and dividends.”

Second Quarter Performance
Sales for the second quarter rose 2.9% to $1.26 billion. Strong growth was seen in the industrial supplies category with sales up 20.5%. Janitorial/break room sales grew 11.5%, while office products achieved 4.4% growth. These were partially offset by a 5.8% decline in the technology category and a 3.9% decline in the furniture category.

The gross margin for the quarter was $184.2 million, or 14.7% of sales, compared with $179.2 million, or 14.7% of sales in the year-ago quarter. Gross margin benefited from higher inventory purchase-related supplier allowances and “War on Waste” (WOW) savings offset by a lower-margin mix, continued competitive pricing pressures, and higher diesel fuel costs.

Second quarter 2011 operating expenses were $136.4 million, or 10.9% of sales, compared with $128.9 million, or 10.6% of sales, in the second quarter of 2010. In the second quarter of 2011, a non-cash pre-tax $4.4 million equity compensation charge was taken with respect to a transition agreement with the company’s former chief executive officer. Recorded in the same period last year was a non-cash $2.8 million pre-tax reversal of liabilities resulting from the termination of a post-retirement medical plan. Excluding these non-cash items, second quarter 2011 adjusted operating expenses were $132.0 million(1), or 10.5%(1) of sales, compared with $131.7 million(1), or 10.8%(1) of sales in the prior-year quarter. Operating expenses reflected continued investments in the company’s strategic growth initiatives offset by lower variable compensation expense and savings from WOW initiatives.

Operating income for the quarter ended June 30, 2011 was $47.8 million, or 3.8% of sales, versus $50.3 million, or 4.1% of sales, in the second quarter of 2010. Excluding the non-cash items noted above, adjusted operating margin was up 9.8% to $52.2 million(1) or 4.2%(1) of sales, compared to $47.6 million(1), or 3.9%(1) of sales, in the year-ago quarter.

Diluted earnings per share for the latest quarter were $0.54, compared with $0.55 in the prior-year period. Excluding the items noted above, adjusted earnings per share were $0.59(1), up 16%, compared with $0.51(1) in the prior-year quarter. Earnings per share in the 2011 quarter were unfavorably affected by a higher effective tax rate. The ongoing share repurchase program benefited earnings per share by reducing average shares outstanding by nearly three million or 6%.

Six-Month Performance
Sales in the first half of 2011 were $2.49 billion, up 4.2% workday adjusted, compared with the prior-year period. This was led by a 23% increase in industrial supplies, a 9.5% increase in janitorial/break room, and a 3.9% increase in office products, which were partially offset by lower furniture sales of 2.4% and lower technology sales of 1.3%.

Gross margin for the first half of 2011 increased to $366.6 million, or 14.7% of sales, compared to $346.1 million or 14.6% of sales in the same prior-year period. The increase was due to higher inventory purchase-related supplier allowances and WOW savings. These favorable items were partially offset by a lower-margin mix, continued competitive pricing pressures and higher diesel fuel costs.

Operating expenses in 2011 were $278.8 million, or 11.2% of sales, including a non-cash $4.4 million equity compensation charge as well as a $1.6 million asset impairment charge with respect to the company’s equity investment in a managed print services business, compared with $260.0 million, or 10.9% of sales, last year, which included a benefit from an accrual reversal for the termination of a post-retirement medical plan. Excluding these items, operating expenses in 2011 were $272.8 million(1), or 10.9%(1) of sales, compared with the prior year of $262.7 million(1) or 11.1%(1) of sales. The operating expense ratio declined due to lower variable compensation expense and WOW savings partially offset by spending on growth initiatives.

Operating income for the first half of 2011 was $87.8 million or 3.5% of sales, compared with $86.1 million or 3.6% of sales. Excluding the items mentioned above, operating income in 2011 rose 12.6% to $93.9 million(1), or 3.8%(1) of sales, compared with $83.4 million(1) or 3.5%(1) of sales, in the prior year.

Diluted earnings per share for the first half of 2011 were $0.97 versus $0.91 in the first half of 2010. Excluding the items mentioned above, diluted earnings per share for the first half of 2011 were up 22% to $1.07(1), compared with $0.88(1) in the prior-year period.

Cash Flow, Debt Trends and Share Repurchases
Net cash provided by operating activities for the six months ended June 20, 2011 was $73.3 million, compared with $54.7 million in the same period last year. Operating cash flow in 2011 was favorably affected by strong earnings and a reduction in inventory. Cash flow used in investing activities totaled $16.1 million in 2011, compared with $26.2 million in the same period last year. Capital spending is expected to be approximately $35 million for all of 2011.

The company has approximately $850 million of total committed debt capacity with $441.8 million outstanding at June 30, 2011. Debt-to-total capitalization declined to 37% from 39% at June 30, 2010. During the latest six months, the company paid $69.9 million to acquire approximately 2.1 million shares and paid a cash dividend of $6.0 million to common shareholders. These outflows were partially offset by net proceeds from the exercise of stock options of $13.8 million.

Company Overview
United Stationers Inc. is a leading wholesale distributor of business products, with 2010 net sales of approximately $4.8 billion. The company stocks approximately 100,000 items, including technology products, traditional office products, janitorial and break room supplies, office furniture, and industrial supplies. A network of 64 distribution centers allows it to deliver these products to over 25,000 reseller customers. This network, combined with United’s depth and breadth of inventory, enables the company to ship most products overnight to more than 90% of the U.S. and major cities in Mexico. For more information, visit www.unitedstationers.com.




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